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 Concerns about China consigned Asian shares to a seventh straight
weekly loss and Europe's markets fell 2 percent after rising almost
2.5 percent on Thursday.
"Markets are worried about a too strong U.S. job report which could
spark the Fed into hiking rates in September," said Philippe Gijsels,
head of research at BNP Paribas Fortis Global Markets.
Wall Street was set to follow suit, with index futures pointing to a
fall of 1.1 percent in the S&P 500.
Thursday's gains in Europe were driven by ECB President Mario Draghi
saying the bank was prepared to expand its 1 trillion euro stimulus
program aimed at lifting growth and inflation in the euro zone.
But Friday's focus was on whether U.S. jobs data due at 1230 GMT
would keep the Federal Reserve on track to raise its record low
interest rates later this year.
Economists polled by Reuters expect the U.S. economy to have
produced 220,000 new jobs last month, continuing the robust
employment creation of the past five years. Average hourly earnings
are predicted to have risen by 0.2 percent, as they did in July.
A strong reading will keep alive chances that a first Fed hike in
almost a decade could come this month. Following a tough last month
for global markets however, markets now see December or early next
year as more likely.
"We were until recently firm Septemberists but now it's very much on
a knife edge," said Luke Bartholomew at Aberdeen Asset Management in
London.
"Market volatility has shaken them (Fed policymakers) somewhat ...
so seeing that markets are very fragile, do they want to shock them
with hiking now? I think that is a very live debate now."
In the foreign exchange markets, the dollar fell 0.8 percent against
the yen to 119.10 as the safe-haven Japanese currency capped a third
week of gains.
The euro was fractionally stronger at $1.1130 having been driven to
a two-week low of $1.10875 and a four-month low against the yen by
Draghi's talk of more money printing.
The ECB also cut its growth and inflation forecasts and warned of
possible further fallout from China. Coupled with a potential delay
to a Fed move, euro zone bond yields fell further on Friday, with
German 10-year yields, hitting their lowest level in nearly a week
at 0.69 percent.
"Fundamentally market reaction to U.S. data can be short-lived. In
the medium-term perspective ECB QE matters more than U.S. non-farm
payrolls so we think the bias is bullish for (German) Bunds," said
BNP Paribas strategist Patrick Jacq.
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CRISIS PROPORTIONS
Strains in Asia stayed close to the surface despite hard-hit Chinese
markets being closed for a second day for a holiday.
MSCI's broadest index of Asia-Pacific shares outside Japan chalked
up its worst weekly losing streak since 2011 as it ended down 0.9
percent on the day and more that 4 percent on the week.
Japan's Nikkei fared even worse. It fell 2.5 percent on the day and
7 percent for the week as it slumped to a seven-month low.
There was so sign of relief for the region's emerging market
currencies either.
Bank Negara Malaysia was spotted intervening to stem the ringgit's
weakness as confidence continued to be hit by a corruption scandal
swirling round Prime Minister Najib Razak.
The Institute of International Finance warned the current slump in
emerging market stocks -- down 40 percent since April -- and
currencies had now reached "crisis proportions"
In commodities markets, which have been battered by fears of a hard
landing in China, trade remained highly volatile.
Brent crude slipped 0.4 percent to $50.47 per barrel although it was
clinging to a second week of modest gains.
Copper fell 1.6 percent to $5,160 per tonne after surging to $5,314
on Thursday, a more than three-week high, as investors closed out
positions before the U.S. jobs data.
(Additional reporting by Nichola Saminather and Hideyuki Sano in
Singapore and Tokyo; Editing by Toby Chopra)
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