US pre-open: Futures point to losses as jobs data dampens hopes for rate cuts

Wall Street futures had major US indices opening lower on Monday as last week's strong jobs data dampened expectations that the Federal Reserve would cut interest rates by 50 basis points when rate-setters next met at the end of the month.

As of 1230 BST, Dow futures were pointing to a loss of 0.29% at the opening bell, while S&P 500 and Nasdaq futures were down 0.26% and 0.47%, respectively.

US stocks finished slightly lower on Friday following a stronger than expected jump in hiring in June, which called into question the speed - but not the likelihood - of interest rate cuts by the Federal Reserve over what remained of 2019.

Fed funds futures were left fully pricing-in a 25 basis point cut at the 30-31 July Federal Open Market Committee meeting, instead of even odds of a 50 point reduction just before the jobs report's release, a 100% chance of a further 25 point cut by December and roughly even odds of another 25 basis points being lopped-off.

With the outlook for rate cuts now a bit murkier, Morgan Stanley said it was "putting our money where our mouth is" and downgraded global equities to 'underweight' from 'equal-weight' on Monday.

"The most straightforward reason for the shift is simple — we project poor returns," said MS analyst Andrew Sheets and his team.

While Morgan Stanley said it was still expecting a rate cut, Sheets argued that history showed that when central banks cut because growth was weak, it was the weakness that mattered more for stocks in the long run.

"If you don’t believe us, we have some European stocks from April 2015, shortly after the European Central Bank's first QE program was announced, that we'd like to sell you,” he added.

Strategists at JP Morgan led by Mislav Matejka on the other hand were more upbeat, projecting a gain of roughly 15% for global stocks over the next 12 months, on the back of an anticipated rebound in earnings growth and because stocks had yet to hit a peak in valuation multiples.

On the data front, US consumer credit figures were set to be published at 2000 BST.

In corporate news, Airborne Wireless and Levi Strauss were both set to post their most recent set of quarterly results on Monday.