Global markets jittery ahead of US jobs data

[November 06, 2010]  LONDON (AP) -- European stock markets traded lower Friday ahead of key U.S. jobs data, following a big stock market rally around the world in the wake of the Federal Reserve's decision to pump $600 billion into newly-created money the U.S. economy.

In Europe, the FTSE 100 index of leading British shares was down 20.47 points, or 0.4 percent, at 5,842.32, a day after it had closed at its highest level since June 2008, while France's CAC-40 was down 17.74 points, or 0.5 percent, at 3,899.04. Germany's DAX was down 16.22 points, or 0.2 percent, at 6,718.47, a day after it joined the FTSE to close at a 28 month high.

Wall Street was also poised for a modest retreat at the open following Thursday's big gains, which had sent the Dow Jones industrial average up to its highest level since just before U.S. investment bank Lehman Brothers collapsed September 2008 and the broader Standard & Poor's 500 index up to a 2010 high -- Dow futures were down 24 points, or 0.2 percent, at 11,360 while the S&P 500 futures fell 3 points, or 0.3 percent, to 1,215.60.

How stocks perform over the rest of the day though will likely hinge on the Labor Department's nonfarm payrolls data for October -- the jobs figures often set the tone in all markets for a week or two after their release.

The figures may be even more noteworthy than usual given that the rate-setting Federal Open Market Committee (FOMC) has indicated it will be monitoring economic data to see if it needs to mop up as many assets as it said.

"Given that the FOMC's statement made it very plain that the Fed is currently focused on the employment pillar of its dual mandate, and despite the very obvious fact that the U.S. labour report is extremely unreliable, this and associated labour market data will remain the juggernauts of U.S. economic statistics," said Marc Ostwald, markets strategist at Monument Securities.

Economists expect the Labor Department to report that the U.S. added just 60,000 jobs, fewer than the 100,000 needed to keep pace with population growth. The unemployment rate is expected to remain 9.6 percent for a third straight month.

Perhaps more important than the headline number will be what is going on in the private sector alone. Stripping out government related jobs developments, the consensus is that the private sector added around 80,000 during October.

The concern in the markets is that following Thursday's big stock market gains around the world, which carried through into Asian trading Friday, the figures may have to be even stronger than expected to generate further stock gains going into the weekend.

"The markets may have some upside left in them before the year-end, but right now it's looking like a case of too far, too fast," said Ben Critchley, sales trader at IG Index.

Currency markets will also be keeping a close watch on the jobs figures, a day after the dollar sank to a near 2010 low against the euro following the Fed's decision to buy an additional $600 billion of assets over the next eight months in an attempt to get market interest rates even lower than where they are to inspire lending and boost the U.S. economy.

Though the prospect of more dollars in the financial system has been a boon to stocks over the last few weeks, the dollar has tanked. The selling, particularly against the euro gathered pace in the wake of the announcement.

The Fed's decision to back another round of so-called quantitative easing has not been welcomed everywhere.

China's central bank chief Zhou Xiaochuan said the Fed's move might hurt the rest of the world.

"If the domestic policy is optimal policy for the United States alone, but at the same time it is not an optimal policy for he world, it may bring a lot of negative impact to the world. There is a spill over," Zhou said.

The dollar recovered Friday however, particularly against the euro, which was dragged down by disappointing retail sales figures for the 16 countries that use the euro and ongoing worries about Ireland's debt problems.

By late morning London time, the euro was 0.8 percent lower at $1.41 while the dollar was 0.1 percent higher at 80.79 yen.

Earlier, Asian shares had advanced in the wake of Thursday's rally in the U.S. and Europe.

Japan's benchmark Nikkei 225 stock index soared 267.21 points, or 2.9 percent, to 9,625.99 and Australia's S&P/ASX 200 added 1.2 percent to 4,800.60. Hong Kong's Hang Seng index climbed 1.4 percent to 24,876.82 and China's Shanghai Composite Index rose 1.4 percent to 3,129.50.

The Fed's move has also boosted the prices of commodities like oil since expectations the Fed would increase the money supply have weakened the dollar, which is the currency most commodities are traded in. A weaker dollar makes commodities more attractive to investors holding other currencies.

Benchmark crude for December delivery was up 15 cents at $86.64 a barrel in electronic trading on the New York Mercantile Exchange after earlier reaching $87.22.

[Associated Press; By PAN PYLAS]

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