US pre-open: Stocks seen slightly lower ahead of payrolls

US stock futures pointed to a flat to lower open on Wall Street on Friday as investors looked to the release of the latest non-farm payrolls report.

At 1230 GMT, Dow Jones Industrial Average futures were flat, while S&P 500 and Nasdaq futures were down 0.1% and 0.5%, respectively.

Market participants will be mulling the latest developments between the US and China, after President Trump said on Thursday that he will meet with Chinese President Xi Jinping soon to seal a deal on trade.

Speaking at the White House during a meeting with Chinese vice premier Liu He following two days of trade talks between US and Chinese delegates, Trump said he was optimistic that the two nations could reach "the biggest deal ever made".

Oanda analyst Craig Erlam said both sides have good reason to find a compromise on the issue and avoid further tariffs, or even reverse those previously imposed.

"The Chinese economy is currently in the midst of an economic slowdown - as evidenced by the worrying manufacturing PMIs this week - and Trump will be hoping to secure re-election next year and is in need of a big win."

Overnight, China's Caixin/Markit manufacturing purchasing managers’ index for January came in at 48.3, down from 49.7 in December, marking its worst reading since February 2016 and missing expectations for a reading of 49.5.

The big focus for the day will be the US non -farm payrolls report, unemployment rate and average earnings, all due at 1330 GMT. The jobs report is expected to show an increase of 165,000 in January compared to the 312,000 jobs that were added in December.

Meanwhile, the unemployment rate is expected to hold steady at 3.9%, while yearly average earnings are forecast to be unchanged at 3.2%.

Erlam said: "The shutdown itself is not expected to have a direct impact on the non-farm payrolls figure, but there may be less significant indirect impacts that weigh on the number. With that in mind, it would take quite a horrible number to grab people’s attention, with investors most likely shrugging off the data as an anomaly.

"With everything appearing to be a dollar-negative headline right now, I wonder whether the jobs report may offer the greenback some reprieve. If markets are already expecting a potential blip in the report then the room for upside surprise may be significant. Positive Sino-US trade talks and a more dovish Fed have dragged on the dollar over the last month or two so some bullish headlines may be welcomed."

In corporate news, online retail giant Amazon was sharply lower in pre-market trade after it posted record quarterly earnings and revenue on Thursday but issued a weaker-than-expected outlook.

Elsewhere, Merck shares looked set to gain at the open after better-than-expected fourth-quarter numbers, while Honeywell was also likely to push higher after it forecast full-year earnings above analysts’ estimates.