Europe shakes off doubts before US jobs data

[LONDON] Worries over spluttering growth and a downturn in commodity markets put global stock markets on course for their first weekly decline in a month on Friday, although European shares reclaimed some of the ground they had lost on Thursday.

After another frenetic week for financial markets, investors were trying to catch their breath before U.S. jobs data at 1330 GMT. Economists polled by Reuters expected it to show 230,000 new jobs were added last month and the unemployment rate was unchanged at 5.8 per cent.

"We know the employment growth has been decent for a couple of months now, so if we get close to the consensus, that just confirms what we already know," said Philip Marey, a US-focused Rabobank economist.

"So the Fed will want to see 'underemployment' rate fall further and they want the hourly earnings growth to rebound to 3-4 per cent. That is what is becoming increasingly important."

The dollar hit a seven-year high of 120.335 yen in early European trading, helped by a Wall Street Journal report that simulations by Federal Reserve economists suggest it would be best to raise interest rates promptly. Expectations the Fed will move some time next year are fuelling the dollar's rally.

Unlike the United States, Europe, China and Japan are all losing momentum, slowdowns that are weighing on stock markets. Germany's Bundesbank halved its 2015 growth forecast for Europe's largest economy on Friday.

The pan-European FTSEurofirst 300 was up 1 per cent after a 1.4 per cent flop on Thursday, but MSCI's 45-country All World index was limping towards its first weekly drop in four.

The Russian rouble dropped again this week following more aggressive rhetoric over Ukraine and a further decline in oil prices. But it firmed against both the dollar and the euro on Friday, probably on interventions from the central bank.

It was up as much as 3.3 per cent on the day against the dollar in early trade, then drifted back down. It was up 1.3 per cent at 53.7 against the dollar by 0930 GMT.

"It's undoubtedly the central bank - more than a billion dollars was sold in a few minutes," said a dealer of a major Russian bank.

"No one else is in a position to trade such volumes now." Brent crude was back below US$70 a barrel and heading for a 10th weekly loss out of the past 11. Top oil exporter Saudi Arabia cut prices again on Thursday, in another sign of the escalating price war in the market.

In contrast, gold was heading for its biggest weekly gain in 10 months as the prospect of central bank stimulus in the eurozone, China and Japan boosted demand for the metal as an inflation hedge.

Spot gold was little changed at US$1,205.60 an ounce, but there was also caution ahead of the upcoming US jobs data.

"Should (payrolls) numbers exceed 230,000 it could send gold tumbling quickly," said Howie Lee, an analyst at Phillip Futures, adding that support could come in at US$1,140.

REUTERS