Morning Bid: Shares pull back as markets await likely payrolls beat

A look at the day ahead in European and global markets from Stella Qiu

Global shares are pulling back after a bumper quarter. Quarter-end rebalancing was partly to blame but there are also bubbling concerns about how long the AI party will go on. News that Meta plans to sell excess AI compute does make one wonder if it still has the need to buy all those hot chips.

Asia took an early kicking. South Korea was initially hammered nearly 7% on heavy selling in chipmakers including SK Hynix and Samsung Electronics, though the rout has abated somewhat. The KOSPI was last off 3% and Japan's Nikkei was down 1.2%. European bourses are bracing for a flat open, with pan-region stock futures up 0.1%.

Nasdaq futures rose 0.3% and S&P 500 futures were 0.2% higher.

Hereafter, the focus will be on the U.S. nonfarm payrolls report, arriving a day early due to the Independence Day holiday on July 4.

Economists expect a median rise of 110,000 jobs in June, but forecasts range widely from 25,000 to 200,000. The football World Cup has probably created thousands of temporary jobs, adding to the high chance of an upside surprise. The jobless rate is forecast to stay steady at 4.3%.

Treasury yields have been climbing in anticipation of some strong numbers, with two-year yields up 9 basis points on the week so far, regardless of what Federal Reserve Chair Kevin Warsh said about inflation risk coming down.

A jobs beat will likely add to market pricing for policy tightening from the Fed this year, with a move in September about 80% priced in, while a weak result would ease pressure for any interest rate hikes this year.

Global central banks are finding solace in oil prices which hit another four-month low on Thursday. European Central Bank President Christine Lagarde said inflation and growth risks were more broadly balanced now, as markets pare back the possibility of an ECB rate hike.

The euro zone unemployment rate for May is also due later in the day, where the forecast is for a steady 6.3%. Inflation eased more than expected to 2.8% in June.

The yen hovered near a 40-year low at 162.52 a dollar, with the U.S. jobs data likely to be pivotal in determining its near-term fate. Japan has stepped up intervention rhetoric but has not been seen in the market yet.

Rather, sources said officials are abandoning their habit of telegraphing intervention, instead planning a more calculated campaign to squeeze short positions and raise the cost of betting against the yen.

Key developments that could influence markets on Thursday:

• US payrolls report for June

• Euro zone unemployment rate for May

• Federal Reserve Bank of San Francisco President Mary Daly speaks in Spain

(By Stella Qiu; Editing by Christopher Cushing)