World markets awaiting key US jobs data

[December 04, 2010]  LONDON (AP) -- World markets traded in narrow ranges Friday ahead of crucial U.S. jobs data, while the euro remained buoyed by the European Central Bank's decision to keep providing banks with as much cash liquidity as they want.

In Europe, the FTSE 100 index of leading British shares was down just over a point at 5,766.38 while Germany's DAX rose around 5 points to 6,952.34. The CAC-40 in France was 0.4 percent higher at 3,760.63.

Wall Street was poised for a modest retreat following Thursday's big gains -- Dow futures were down 30 points at 11,333 while the broader Standard & Poor's 500 futures fell 0.1 percent to 1,221.

The open on Wall Street will largely hinge on the November nonfarm payrolls data and expectations are fairly upbeat following a run of forecast-busting U.S. economic data, which have raised hopes that the recovery in the world's largest economy is picking up pace.

The consensus forecast in the markets is that the U.S. added around 150,000 jobs in November, but that the unemployment rate remained at 9.6 percent.

"Today's U.S. labour data will be instrumental in determining whether risk appetite will improve going into the end of the year," said Jane Foley, an analyst at Rabobank International.

Beyond the recent series of strong U.S. economic data, market sentiment has been buoyed by an easing in tensions over Europe's debt crisis, which after Ireland's bailout last weekend threatened to engulf other countries.

Confirmation from the European Central Bank on Thursday that it will continue to offer as much cash liquidity as banks need at a super-low rate through the first half of next year has contributed to the easing in tensions, helping stocks and the euro gain.

Markets were initially disappointed by the failure of ECB president Jean-Claude Trichet to announce an increase in the pace at which the central bank buys government bonds.

But the currency recovered to trade higher on the day amid market speculation that the bank might in fact be buying bonds of financially troubled eurozone countries despite Trichet's reticence on the issue.

"Yesterday's contrast between market 'disappointment' during Trichet's conference and 'relief' following rumours of ECB bond buying was stark," said Daragh Maher, an analyst at Credit Agricole. "Although evidence supporting these rumours will not be confirmed until next week, the subsequent reaction seems to suggest their validity."

The euro remained supported Friday, trading 0.1 percent higher on the day at $1.3243. Earlier this week, the euro had sunk below $1.30 amid mounting fears that bailouts would be required for Portugal, or more dangerously, Spain.

Judging by the bond markets, those fears have diminished somewhat, with the yields on both countries' ten-year bonds down again Friday. In Portugal's case, the decline has been dramatic. The yield on its ten-year bonds is around 6 percent, a full percentage point lower than where it was just a couple of days ago.

Europe's debt crisis hasn't vanished overnight, however, and it is possible that the markets will return to test the resolve of policymakers.

On Thursday, the credit rating Standard & Poor's issued a warning that it may downgrade Greece's debt sometime in the next three months if new European bailout rules prove onerous to private holders of the country's bonds. Greece was the first eurozone country to be bailed out by its partners in the EU and the International Monetary Fund in May to the tune of euro110 billion.

S&P said it will decide whether to downgrade Greece within three months, by which time the new debt-crisis rules will be clear. S&P issued a similar warning about Portugal this week.

"The Greek credit rating warning simply highlights ongoing nature of eurozone crisis," said Neil MacKinnon, global macro strategist at VTB Capital.

Earlier, Asian stocks mostly rose amid signs the U.S. economy is picking up steam but mainland Chinese shares edged lower after the state news agency said the ruling Communist Party's top body, the Politburo, ordered a switch in monetary policy "from relatively loose to prudent."

The benchmark Shanghai Composite Index shed less than 0.1 percent to 2,842.43 while the Shenzhen Composite Index fell 0.6 percent to 1,302.25.

Japan's Nikkei 225 stock average closed 0.1 percent higher at 10,178.32 and South Korea's Kospi edged up 0.4 percent to 1,957.26. Australia's S&P/ASX 200 added 0.4 percent to 4,694.2.

Hong Kong's Hang Seng index finished 0.6 percent lower at 23,320.52.

Benchmark oil for January delivery was down 35 cents to $87.60 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.25 to settle at $88 a barrel on Thursday, just shy of the 2010 high of $88.29.

[Associated Press; By PAN PYLAS]

Associated Press writer Pamela Sampson in Bangkok contributed to this report.

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