Markets pause ahead of U.S. jobs report and tariff ruling

Analysts say the court’s ruling is likely to be the main source of volatility. If the tariffs are struck down, government revenues could fall, putting pressure on Treasuries and pushing yields higher. Some analysts believe scrapping the tariffs would improve sentiment, though the White House is unlikely to abandon efforts to preserve them through other means.

With uncertainty rising, investors are avoiding bold positioning. The MSCI Asia-Pacific ex-Japan index moved within a tight range and slipped 0.2% after hitting a record high earlier in the week. European index futures showed a modest 0.34% gain. Japan’s Nikkei rose 1.5%, driven by strong earnings from Fast Retailing, the parent company of Uniqlo.

The U.S. S&P 500 ended the previous session flat, though the defense sector hit a new all-time high, reflecting rising demand for defensive assets amid geopolitical tensions. European defense stocks showed similar strength.

Investors are also awaiting fresh U.S. labor-market data. Economists expect the economy to have added about 60,000 jobs in December – after 64,000 in November and a loss of 105,000 in October. Analysts describe the current environment as “no hire, no fire” – companies are avoiding both aggressive hiring and significant layoffs.

Traders are pricing in at least two Federal Reserve rate cuts this year, even though the central bank signaled only one in December. To shift markets, the jobs report would need to either beat expectations by a wide margin, reinforcing labor-market resilience, or fall well short, strengthening expectations for more aggressive easing.

The 10-year Treasury yield is holding near 4.18% after rising 4.5 bps. The dollar index remains at a one-month high.

Oil prices continue to climb amid tensions involving Venezuela and potential supply disruptions from Iraq and Iran. Brent rose to $62.49, while WTI reached $58.25.

Markets head into the end of the week in standby mode: volatility is likely to stay subdued until investors get clarity on both tariffs and the condition of the U.S. labor market.