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 Asian stocks had edged up overnight and there was a 0.5 percent
rebound for European bourses in morning trade, after the European
Central Bank disappointed the markets on Thursday and triggered the
biggest sell-off in over a year in markets like Italy.
Uncertainty about U.S. non-farm payrolls data due later in the day
left traders set for a volatile session, as did lower volumes with
several major centers including India, China and Germany shut for
public holidays.
Dollar bulls, who have pushed the currency to a four-year high this
week, were counting on the report to show U.S. employers stepped up
hiring in September following some healthy signals already this
week.
Economists polled by Reuters expect a 215,000 rise in jobs, up from
a disappointing 142,000 in August and for the unemployment rate to
stay steady at 6.1 percent.
"We do think the jobs report will be pretty good, if you look at the
leading indicators they have improved quite a lot," said Kully Samra,
a managing director at U.S. investment firm Charles Schwab in
London.
Growth worries particularly in the euro zone and China,
geo-political risks as well as concerns about the effects of the
Federal Reserve ending its massive stimulus have all conspired to
unsettle global equity markets in recent weeks.
MSCI's 45-country world stock index was up for the first time this
week on Friday, but was on course for a weekly fall of 2.3 percent
and down 6 percent in the last four.
October is a month associated with previous market shakeouts
including the 1929 and 1987 crashes and for investors the question
is whether the high tide of risk appetite is really starting to
turn.
"Corrections are always possible, and maybe we are stretched (on
stocks) at the moment, but I don't think this is setting us up for
something worse," said Schwab's Samra.
"We are giving a very low risk of recession in the U.S. in the near
to medium term and that is what typically kills off bull markets."
HONG KONG CAUTION
Having led the market's charge on U.S. rate rise bets, the dollar
was heading for a 12th straight week of gains as its longest upward
run since its free-float in the 1970's continued.
The dollar index was last at 85.960, not far from the peak of 86.218
set earlier in the week. Against the yen, the dollar fetched 108.95,
having reached a 6-year high of 110.09 on Wednesday. The euro traded
at $1.2620, near a two-year trough of $1.2571 plumbed on Tuesday.
Markets have long been obsessed with U.S. non-farm jobs data because
it is one of the best readings on the health of the U.S. economy the
Federal Reserve gets.
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Starting on Monday though the central bank will publish its own
employment index that draws together 19 different indicators which
will be known as the Labor Market Conditions Index, or LCMI.
Asian markets were further underwhelmed on Friday after a survey
showed growth in China's services sector eased to its slowest pace
in eight months.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.66
percent, but is still down more than 1 percent so far this week. It
has fallen about 7.8 percent in the last four weeks, marking its
worst performance in over a year.
"As we went into today, there was a risk this was going to happen.
Traders were saying there was a bit of value in the market... today
calmer heads prevailed," said Chris Weston, chief market strategist
at IG. Investors were also keeping a wary eye on developments in
Hong Kong, where leader Leung Chun-ying agreed to open talks with
pro-democracy protesters on Friday but defied demands that he step
down and warned the consequences would be serious if they stormed
government buildings.
COMMODITY CRUNCH
As investors grappled with questions about whether a rebound in the
jobs data would hasten interest rate rises in the world's biggest
economy, U.S. and German bond yields edged higher and Wall Street
futures pointed to 0.3-0.4 percent gains.
Commodity, particularly oil, markets have been the other hugely
turbulent area over the last few weeks. Investors are struggling
with divergent growth but also signs major producers like Saudi
Arabia are being drawn into a price war. (Editing by Hugh Lawson)
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