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Asian shares tread cautiously ahead of US payrolls

[TOKYO] Asian shares edged higher on Friday and oil prices continued to rebound, but investors remained wary ahead of the US nonfarm payrolls report for January later in the session.

MSCI's broadest index of Asia-Pacific shares outside Japan was up about 0.1 per cent, on track for a weekly gain of more than 1 per cent. Japan's Nikkei stock average ended up 0.8 per cent but marked a slight weekly loss, after shedding 1 per cent on Thursday.

Financial spreadbetters expected a modestly weaker start to European trading, with Britain's FTSE 100 seen opening 14 to 16 points lower, or down 0.2 per cent; Germany's DAX expected to open 18 to 19 points lower, or down 0.2 per cent; and France's CAC 40 estimated to open 11 to 13 points lower, or down 0.3 per cent. "European equities are set to drift lower as traders prepare for today's US jobs number," Jonathan Sudaria, a dealer at Capital Spreads, said in a note. "Traders will be hoping for a Goldilocks number just above 200k, showing that the US economy is ticking over nicely, but not roaring ahead, as to invoke the Fed to start tightening," he said.

Economists polled by Reuters expected US employers to have taken on 234,000 workers in January, below December's increase of 252,000. The jobless rate was expected to remain at a 6-1/2-year low of 5.6 per cent, while average hourly earnings were forecast to show a rise of 0.3 per cent, following the previous month's fall of 0.2 per cent. "The main focus for the market is whether earnings bounce back as expected, after last month's surprise drop," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank in Tokyo. "Another market focus now is Greece, which is a situation that will take time to develop. It might be difficult for stocks to rise too much in the meantime," she added.

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Greek Prime Minister Alexis Tsipras pledged on Thursday to"put an end once and for all" to the European Union's austerity policies and to bargain hard for a new deal for Greece, after the European Central Bank decided to stop accepting Greek bonds as collateral to raise cash.

Greece's new leftist finance minister clashed openly with his powerful German counterpart on Thursday as Athens' borrowing costs leapt and bank shares plunged. The ECB's decision heightened fears about Greece's financial system and the possibility that the country might leave the euro zone.

But Wall Street managed to put worries about Greece on the back burner on Thursday. Major indexes all ended with gains of 1 per cent or more, while a rise in US Treasury yields underpinned the US dollar.

Mixed US data on Thursday on jobless claims, productivity and the trade balance gave investors few clues on the overall growth outlook and the timing of the US Federal Reserve's move to raise interest rates, which some believe could be as early as this summer.

Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore, said Standard Chartered's baseline expectation is that U.S. non-farm payrolls will increase by around 260,000.

The market could show a sharp reaction if the increase in non-farm payrolls turns out to be either less than 200,000, or more than 300,000, Henderson said, adding that such results could lead to "quite a bit of volatility".

The dollar edged down about 0.2 per cent against the yen to 117.25. The euro inched down 0.1 per cent against the dollar on the day to US$1.1463, after sharp rises overnight on speculation the Swiss central bank was buying euros to weaken the franc.

The Swiss government warned on Thursday that a soaring franc meant economic growth would be weaker than expected.

Brent crude futures soared about 2.1 per cent to US$57.78 a barrel, while US crude added about 2.6 per cent to US$51.77 a barrel after surging more than 4 percent in the previous session, as an escalating conflict in Libya and optimism about oil demand after China's central bank easing helped the market rebound.

The People's Bank of China cut banks' reserve requirement ratios by 50 basis points on Wednesday, freeing up an estimated 600 billion yuan (US$96 billion) into the money supply.

On Sunday, China will release economic data, expected to show a dip in exports, a Reuters poll showed.