A look at the day ahead in European and global markets

By Stella Qiu, Australia Economics & Markets Correspondent

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Markets are mostly in a holding pattern as traders stayed on the sidelines ahead of the U.S. payrolls report which is getting notoriously difficult to predict month by month.

However, the stakes couldn't be higher as markets cannot seem to make up their mind about how the Federal Reserve will move next month. An interest rate hike is about 54% priced in – basically a coin toss, which is precisely the sort of ambiguity new Chair Kevin Warsh seems to enjoy cultivating.

A woman walks into the U.S. Department of Labor in Washington, D.C., U.S., January 8, 2026. REUTERS/Evelyn Hockstein

The consensus forecast is for a gain of 80,000 jobs for July but the range is so wide - from 10,000 to 140,000 - that someone will be terribly wrong. The unemployment rate is forecast to hold steady at a still low rate of 4.2%, though there's a clique of analysts tipping 4.3%.

So what's the playbook? With inflation risks front of mind for policymakers, an in-line or stronger result would mean the Federal Reserve can hike next month if it's needed without torpedoing the labour market. It would take a much weaker outcome for markets to give up rate hike bets en masse.

Reflecting this suspense, Asian markets had one of their quieter days. Japan and South Korea slipped about 1%, but nothing like the wild swings of recent weeks. Chinese shares eked out gains as its huge export machine kept powering ahead.

European futures are pointing to a slightly softer open, with the pan-region stock index <STXEc1> down 0.2%. Wall Street futures were flat.

Graphics are produced by Reuters

The one pocket of activity was in oil, which climbed 1% on Friday as a deal between the U.S. and Iran to reopen the Strait of Hormuz seems further away than previously assumed. Washington is probably not happy about Tehran's reported demand to bar "hostile" vessels and levy hefty fees on cargo, while the risk of more attacks is ever present.

Brent crude <LCOc1> rose 1.2% to $83.5 a barrel, adding to an overnight gain of nearly 4%, but it's still well off the recent peak of $102.