Equity markets flat as weak US data

SYDNEY global share markets started in haphazard fashion on Monday, as soft US data suggested downside risks for this week's June payrolls report, while the hubbub over possible recession was still driving a relief rally in government bonds.

Early action was light with US markets on holiday and the US dollar was near 20 year highs in the search for safety.

Cash Treasuries were shut but futures extended their gains, meaning that 10 year yields were holding around 2.88 percent, having fallen 61 basis points from their June peak.

The broadest index of Asia-Pacific shares outside Japan was flat, after losing 1.8 percent last week. Japan's Nikkei added 0.6 percent, while South Korea fell 0.8 percent.

EUROSTOXX 50 futures added 0.5 percent and FTSE futures 0.8 percent. S&P 500 futures and Nasdaq futures fell 0.7 percent after holding just a little on Friday.

David J. Kostin, an analyst at Goldman Sachs, said that every S&P 500 sector bar energy saw negative returns in the first half of the year due to extreme volatility.

He said that the bear market was largely driven by valuation rather than the result of reduced earnings estimates.

We expect the consensus profit margin forecasts to fall, which will lead to downward EPS revisions, regardless of whether or not the economy falls into recession. Earnings season starts on July 15 and expectations are lower due to high costs and softening data.

The Atlanta Federal Reserve'sFederal Reserve's forecast for GDP Now fell to an annualized 2.1 percent for the second quarter, implying that the country was already in a technical recession.

The payrolls report on Friday shows that jobs growth is slowing to 270,000 in June, with average earnings falling by a touch to 5.0 percent.

The minutes of the Fed's June policy meeting on Wednesday are nearly certain to sound hawkish, given the committee's decision to hike rates by a super-sized 75 basis points.

The market is pricing in about 85 percent of the chance of another hike of 75 basis points this month, and the rates are going to be 3.25 -- 3.5 percent by the end of the year.

The market has moved to price in an increasingly aggressive rate cut profile for the Fed into 2023 and 2024, which is consistent with a growing chance of a recession, according to analysts at NAB.

There are around 60 bps of Fed cuts for 2023. The US dollar, which is near two-decade highs against a basket of competitors at 105.100, has tended to benefit from investor demand for the most liquid safe harbor.

The euro was flat at $1.0429 and not far from its recent five-year trough of $1.0349. The European Central Bank is expected to raise interest rates for the first time in a decade, and the euro could get a lift if it decides to make a more aggressive half-point move.

The Japanese yen also attracted some safe haven flows late last week, dragging the dollar back to 135.23 yen from a 24 year top of 137.01.

A high dollar and rising interest rates have not been kind to non-yielding gold, which was pinned at $1,812 an ounce after hitting a six month low last week.

The industrial metals were hurt by the global economic downturn, with copper hitting a 17 month low that had sunk 25 percent from its March peak.

Oil prices went up as investors weighed demand concerns against supply constraints. The planned strike among Norwegian oil and gas workers and output restrictions in Libya were just the latest blows to production.

Brent fell 1 cent to $111.62, while US crude fell 10 cents to $108.33 per barrel.