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Asia: Stock futures drop as rally wavers ahead of payrolls data

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[WELLINGTON] Asian index futures signaled a pull back on Friday as the recovery in global equities after the third- quarter selloff struggles to gain traction ahead of key US employment data.

Futures on stock gauges in Japan and Australia were lower in recent trading, as European shares resumed losses and equities in the US slid more than 1 per cent before ending the Thursday session up 0.2 per cent.

The dollar meandered with bonds as traders sat on the fence before the September payrolls report, due early Friday in Washington. Gold headed for its worst week since late July, while US oil rose back above US$45 a barrel.

After anxiety over China's slowdown and its impact on the global economy sparked the steepest quarterly rout in world stocks since 2011, the nonfarm payrolls data will be scrutinised for signs the US recovery has been shaken.

The Federal Reserve cited the market turmoil in its decision to stand pat on raising rates last month, and traders are putting odds of a hike at their Oct 28 meeting at below 20 per cent.

Global equities have fallen this week despite signs of a relief rally as the quarter came to a close.

"Questions like 'will they or won't they?' and 'October or December?' might not get any easier to answer after US labour market data tonight," David Croy, a senior rates strategist in Wellington at ANZ Bank New Zealand Ltd in Wellington, said in a client note.

"The US economy has the strength to be able to withstand a 0.25 per cent to 0.5 per cent cash rate - they are all versions of zero at the end of the day - but ahead of such a symbolic act, markets have got themselves in a tangle and are looking at every piece of data for clues."

STOCKS

Standard & Poor's 500 Index futures were little changed at 1,917.50 by 8.03am in Tokyo, after the gauge oscillated between gains and losses throughout Thursday to eventually cap a three-day advance.

While signs of stabilization in Chinese manufacturing underpinned stock gains in Asia last session, weak US factory data stoked the swings in direction during American trading.

The US benchmark has climbed 2.2 per cent over the past three days after sliding 6.9 per cent last quarter, its worst performance since the same three months of 2011.

Futures on Japan's Nikkei 225 Stock Average were bid down by 0.5 per cent to 17,610 in the Osaka pre-market, after contracts on the broader Topix index slipped 0.8 per cent. Yen- denominated futures on the Nikkei 225 traded in Chicago were little changed at 17,630 after rising 0.8 per cent in the previous session. Japan updates its jobless rate Friday, along with its monetary base for September.

New Zealand's S&P/NZX 50 Index, the first major stock gauge to start trading each day in the Asian region, added 0.1 per cent following three days of losses. Futures on Australia's S&P/ASX 200 Index dropped 0.4 per cent, while those on the Kospi index in Seoul declined 0.1 per cent.

Markets in Hong Kong resume Friday after a holiday, while trading in mainland China doesn't reopen until next Thursday because of the National Day break. Indian markets are also shut for a holiday Friday.

CURRENCIES

The Bloomberg Dollar Spot Index was little changed early Friday after losing 0.1 per cent on Thursday.

The gauge, which tracks the US currency against 10 major peers, has lost 0.2 per cent this week, while capping a 2.8 per cent increase for the third quarter as investors continue to mull when the Fed will pull the trigger on the first rate hike since 2006.

Economists project 201,000 workers were added to non farm payrolls in the US last month, up from August's increase of 173,000. The jobless rate is tipped to hold at 5.1 per cent.

"Our expectation is that a weak number will have more of a dollar-negative impact than a strong number will be dollar positive," Steven Englander, global head of Group of 10 currency strategy at Citigroup Inc in New York, wrote in a research note.

"We've had a series of strong non farm payrolls releases that were not strong enough to move the Fed to liftoff."

Commodities West Texas Intermediate oil added 0.9 per cent to US$45.16 a barrel after erasing a surge of as much as 4.5 per cent Thursday to end the day down 0.8 per cent.

WTI is down 1.2 per cent this week as traders grapple with continued signs of the global glut that drove prices to a six-year low.

US crude stockpiles rose last week and are about 100 million barrels above the five-year seasonal average, data Wednesday showed.

Gold was little changed at US$1,113.99 an ounce on the spot market. The precious metal has slumped 2.8 per cent this week as investors await the jobs report for clues as to the Fed's policy plans.

Higher borrowing costs curb the appeal of bullion, which doesn't pay interest or give returns like other assets such as bonds and equities.

Copper futures climbed 0.3 per cent on the Comex to US$2.3110 a pound, adding to this week's 1.3 per cent advance.

Futures sank 11 per cent last quarter amid mounting evidence of the slowdown in China, which is the word's biggest consumer of industrial metals.

BLOOMBERG