* Markets nervous ahead of jobs data seen key to U.S.
* NFP above 200,000 expected to fuel December taper bets
* Bund yields rise, equities on track for steep weekly drop
By Toni Vorobyova
LONDON, Dec 6 The dollar rose and government
borrowing costs from Japan to Germany hovered around fresh highs
on Friday, on expectations of strong U.S. data that would back
the case for an imminent scaling-back of Federal Reserve
U.S. non-farm payrolls, due at 1330 GMT, could tip the
balance of when the Fed will begin to trim the $85 billion a
month of bond purchases which have dominated trading across the
globe and supported risk assets for months.
A better-than-expected employment picture from the ADP
private sector jobs report and weekly jobless claims in the last
two days have prompted markets to prepare for a possible beat to
forecasts of an increase of 180,000 in U.S. payrolls.
German 10-year yields held at seven-week peaks on Friday
, while Bund futures were 1 tick up at
139.97, on track for their biggest weekly fall since mid-August.
In Japan, 10-year cash JGB yields were highest since early
October, while U.S. Treasury yields on Thursday rose to levels
not seen since mid-September - when Fed tapering was
last seen as imminent.
The market would tend to see anything over 200,000 on
non-farm payrolls as greatly adding to the chances of a start to
tapering this month, while a result under 150,000 would diminish
the likelihood, likely prompting a relief rally in risk assets.
"A very strong payroll would give greater confidence that
the U.S. has weathered the recent government shut down well,"
said Luke Bartholomew, investment analyst at Aberdeen Asset
It would "increase speculation that tapering could still be
on the cards for December. So, perversely, a strong number could
be damaging for stocks and other risk assets."
European bourses made a cautious recovery in morning trade
, as London's FTSE, Paris's CAC 40 and
Frankfurt's Dax gained 0.2 to 0.4 percent.
But the small gains came after four straight sessions of
falls, amplified by the diverging fortunes of the region's top
economies, which have left the broad FTSEurofirst 300 index
heading for its worst week in six months.
Similarly, the MSCI World Index added 0.2 percent, edging up
from a three-week low but still down 1.7 percent on the week
in the face of Fed policy concerns.
In September though, when markets had been positioned for
the taper to start that month, the Fed surprised investors by
staying put, and analysts said this could happen again.
"If we are significantly above 200,000, no doubt people will
get excited about it, but ... that is hardly a labour market
that is delivering a rapid rate of improvement," said Chris
Scicluna, head of economic research at Daiwa Capital Markets.
"The key point is that the underlying momentum in that
economy is not particularly stronger than moderate. I think you
would need a very big upside surprise to justify that," he
added, referring to the likelihood of a Fed move this month.
The dollar edged higher against a basket of currencies
and the yen ahead of the data.
"A generic dollar long (investor) will hope that the
payrolls number is strong enough to boost bond yields, but not
strong enough to boost or scare equities in equal measure," said
Geoffrey Yu, currency strategist at UBS.
Against the euro, though, the greenback held in sight of
Thursday's five-week low, hit after the European Central
Bank appeared in no rush at its last meeting of the year to
offer any further stimulus to the euro zone economy.
Draghi's playing down of the need for another long-term
liquidity operation (LTRO) disappointed dealers who had been
hoping for just such an operation to ease a liquidity squeeze
over year end.
In commodity markets, spot gold held at $1,227 an
ounce, on track for a loss for the week of around 2 percent.
Brent crude rose above $111 a barrel, ending a
two-day drop as severe weather cut oil output in Europe and the