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 Oil prices were up by 0.5 to 1 percent , and the mixed performance
in Asia spread to European stock markets: London and Paris both
gained while Frankfurt was marginally lower. Wall Street looked set
to open flat.
January was the weakest start to a year for shares since the
aftermath of the 2008 financial crisis, and doubts over the U.S.
economy - recently one of the few bright spots globally - have grown
this week.
Short-term U.S. bond yields were roughly stable on Friday but have
fallen by about a third in the past month and by 10 basis points
this week alone, driving the dollar to its weakest performance since
late 2009.
A solid non-farm payrolls report, due at 8.30 a.m. ET might restore
some optimism. The consensus forecast of economists polled by
Reuters was that 190,000 new jobs were created last month.
"There is a general scepticism towards a proper rate hike cycle by
the Fed – that's been driving down the dollar (but)there's probably
not that much room left for dollar weakness," said Commerzbank
currency strategist Thulan Nguyen in Frankfurt. "A better labor
market report could bring back some confidence in the rate cycle."
The dollar was flat on the day at 116.805 yen and 0.1 percent
stronger against the euro at $1.1199. Against a basket of
currencies, it is down 1.3 percent on the week.
After a weak service-sector business sentiment report on Wednesday
and dovish comments from New York Federal Reserve chief William
Dudley, U.S money markets now predict no rise in official interest
rates this year. Earlier, the Federal Reserve's own forecasting
called for four increases.
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That reflects growing concern the world is heading back into
recession. But it also bolsters expectations for more support for
global asset prices from stimulus measures by the world's central
banks.
Hong Kong's Hang Seng rose 0.6 percent and Malaysian and Singapore
stocks also gained Tokyo, Shanghai and various commodity
prices all fell.
Strategists said European bond markets looked to be pricing in a
softer read from the U.S. payrolls report.
"We doubt that even a strong non-farm payrolls number will have the
potential to alter the course," said RBC's chief European macro
strategist, Peter Schaffrik.
"More importantly even, particularly for the fixed income market:
The Fed seemingly is reacting to the equity market weakness, fearing
the feed through into the real economy through a tightening in
financial conditions."
(Additional reporting by John Geddie and Jemima Kelly; Editing by
Hugh Lawson)
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