GLOBAL MARKETS-Bund yield at 1-yr low on Ukraine, payrolls caution

Fri May 2, 2014 4:29am EDT

By Jamie McGeever
    LONDON, May 2 (Reuters) - Global markets traded cautiously
on Friday as uncertainty ahead of U.S. employment figures and
tensions in Ukraine pushed the yield on 10-year German Bunds to
their lowest in a year.
    The move into the relative safety of government bonds, also
including higher-yielding peripheral euro zone paper that pushed
returns on Spanish 10-year debt to a multi-year low, came
despite upbeat corporate merger and acquisition activity and
earnings.
    The big data focus is the U.S. April nonfarm payrolls
report. Economists predict jobs growth of 210,000 and a fall in
the unemployment rate to 6.6 percent. 
    But first quarter U.S. growth estimates are being cut
following weak construction data on Thursday to the point that
the world's largest economy might actually have contracted. 
    That, and an escalation in violence in eastern Ukraine
between government forces and pro-Russian separatists, weighed
on investor sentiment. 
    European stocks failed to get a boost from U.S. drugmaker
Pfizer raising its offer for Britain's AstraZeneca
 or a forecast-busting profit from Royal Bank of Scotland
 that lifted shares in the 81 percent state-controlled
bank by 11 percent.
    "People are a bit nervous about payrolls. Last month there
was so much hype about it and it came out below expectations.
They don't want to get caught out twice, so they are hedging
their positions," said Michael Hewson, senior markets strategist
at CMC Markets in London.
    Hewson also noted that many European and U.S. indices are at
or close to record highs so investors are reluctant to chase
them higher, especially ahead of a long holiday weekend in
Britain.
    At 0800 GMT, the FTSE Eurofirst 300 index of leading
European shares was down 0.1 percent at 1353 points and
Germany's DAX was down 0.2 percent at 9585 points.
Britain's FTSE 100 index was flat at 6807 points and
France's CAC 40 down a third of one percent at 4471.
    In Asia, the MSCI's broadest index of Asia-Pacific shares
outside Japan was up 0.4 percent. China's
markets were closed on Friday.
    U.S. stock futures pointed to a flat open on Wall Street
 . 
    Two corporate stories grabbed the headlines in Europe.
Pfizer raised its bid for AstraZeneca to 50 pounds a share,
valuing the UK drugmaker at 63 billion pounds ($106 billion),
and RBS posted a 1.6 billion pounds profit in the first quarter.
  
    
    CALMER CURRENCIES
    Germany's 10-year government bond yield slipped to 1.45
percent and the 30-year U.S. bond yield was 3.43
percent. Late on Thursday it fell as low as 3.4
percent.
    Spain's 10-year yields fell as low as 3 percent,
their lowest since September 2005 and close to the lowest ever.
    Currency markets were calmer, with the dollar well supported
ahead of the U.S. payrolls report but major currency pairs
trading in tight ranges. 
    The euro slipped 0.1 percent to $1.3853, and the
dollar rose 0.1 percent against the yen to 102.45 yen. 
    In the commodities markets, oil remained top-heavy after
slipping Thursday on disappointing Chinese manufacturing
activity and data showing U.S. crude stocks rose last week to
their highest level since 1982. 
    U.S. crude futures brushed that aside, however, and
rose 0.4 percent to $99.487 a barrel.
    London copper was on track to log its biggest weekly loss in
seven weeks, weighed by the Fed's decision this week to continue
tapering its stimulus, which had provided the commodity markets
with liquidity.
    But in tandem with oil, three-month copper on the London
Metal Exchange recovered ground in early European
trading to rise 0.2 percent to $6,657.00 a tonne. Copper prices
have dropped about 1.6 percent this week.

 (Reporting by Jamie McGeever; Editing by John Stonestreet; To
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