US Fed dents risk appetite
Risk appetite had returned for the first few days of 2013, but it may be suppressed Friday morning after US sentiment took a knock yesterday.
Minutes from the latest Federal Reserve meeting weren't as dovish as many expected, triggering a sell-off in US stocks. The minutes stated that several FOMC members thought it would be appropriate to slow or stop asset purchases well before the end of 2013.
While this doesn't seem vastly different from Ben Bernanke's position at his last press conference, it was enough to rile markets.
Of far more consequence to future monetary policy direction will be the US jobs report due later today. Now that the Fed effectively has a target for unemployment, the report will be more closely watched than ever.
About 160,000 jobs are expected to have been added last month, though the December number is more difficult to predict due to temporary hiring over the Christmas period.
Non-farm payrolls will be the main event of the day, but Markit and ISM PMIs should also have an impact on spread direction. The Markit/HSBC China Services PMI showed the weakest pace of activity growth since August 2011, though the sector was still expanding. China's CDS remained close to their recent tight levels of 57bps.
Meanwhile, the Markit iTraxx Europe was 1.5bps wider at 104bps, still more than 13bps tighter than where it began the year.