GLOBAL MARKETS-Dollar gains, shares steady before U.S. jobs data

Fri Jul 5, 2013 8:06am EDT

* Dollar strengthens before 1230 GMT payrolls print 
    * European shares edgy after gains on central bank pledges
    * Bond markets steady; jobs data key to Fed tapering stance
    * Firmer dollar hits gold and other commodities

    By Richard Hubbard
    LONDON, July 5 (Reuters) - The dollar rose broadly on Friday
and commodities fell before a U.S. jobs report that may shed
light on how quickly U.S. and European monetary policies
diverge.
    Traders said the dollar could test the three-year high
against a basket of currencies hit in May if the payrolls
data due at 1230 GMT is strong as it would fan talk of an
imminent cut in the Federal Reserve's bond-buying programme.  
    Wall Street was expected to open sharply higher, catching up
after the Independence Day holiday with a global rally in stocks
that followed pledges of continued stimulus from the European
Central Bank and Bank of England.
    European shares, which had their best day in 11 months on
Thursday on the back of the central bank comments, were little
changed on Friday as investors trod cautiously in the run-up to
data likely to determine the market trend for the rest of the
day on both sides of the Atlantic.
    Economists expect 165,000 new jobs to have been added last
month and the U.S. jobless rate to have ticked down to 7.5
percent from 7.6 percent in May, a Reuters poll shows. 
    "If we get nonfarm (payrolls) at 165,000, in line, you keep
the (Fed) tapering story in play and you keep the dollar on the
front foot," said Daragh Maher, FX strategist at HSBC.  
    "We're looking at a structurally stronger dollar and the
euro would be an echo to that," he said.
    The euro was down 0.25 percent against the dollar, touching
a five-week low of $1.2869.
    The ECB's unprecedented commitment to keep rates low for an
extended period also drove the gap between 10-year U.S. Treasury
bonds and their German equivalent to its widest since April
2010, giving further support to the dollar. 
    
    The British pound eased too after the Bank of England, under
new governor Mark Carney, sought to guide rates lower by saying
recent rises were "not warranted" by economic developments.
    Sterling was near a four-month low against the dollar,
dipping below $1.50 to trade around $1.4985. 
    "Euro and sterling are both reeling after central banks
moved to depress short-term rates and said any tightening will
lead to a response," said Chris Walker, currency strategist at
Barclays.
  
    
    DIVERGENCE LOOMS
    For equity investors, the impact an early end to the Fed's
$85 billion monthly spending on bonds has to be offset against
the promise of future policy support from two of Europe's
biggest central banks and the ensuing currency weakness.
    "Anytime you get a weaker currency that's very good news for
European domiciled companies that have global revenues," said
Patrick Armstrong, chief investment officer at Armstrong
Investment Managers.
    Trading in Europe's broad FTSEurofirst 300 index was jittery
after it gained 2.4 percent on Thursday and by midday the index
was little changed. MSCI's global share index 
 edged about 0.1 percent higher.
    Bond markets were steady, with German Bund futures 
ticking lower, though Portuguese debt recovered some of this
week's losses after the country's prime minister reassured
investors he could resolve its political crisis. 
    The firmer dollar weighed on some dollar-priced commodities
and gold slipped one percent to $1,236.49 an ounce. Copper
was down 1.3 percent at $6,857.75 a tonne while Brent
crude oil dropped 4 cents a barrel to $105.50.
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