* World shares gains stall before U.S. jobs report
* Euro recovers from ECB rate cut sell-off
* Euro zone bond yields ease as ECB move boosts demand
* Central bank action supports commodities
By Richard Hubbard
LONDON, May 3 World share markets stalled near
five-year highs and the dollar dipped on Friday as investors
braced for monthly jobs data from the United States, which could
add to growing concerns over the global growth outlook.
Oil and gold were also supported as the dollar eased while
the euro recovered some of its losses against the greenback seen
after the European Central Bank cut rates and left the door open
for a further easing in policy.
Analysts expect the April nonfarm payrolls report, due at
1230 GMT, to show American employers hired 145,000 people last
month, up from March's dismal pace of 88,000 but not enough to
erase fears the world's biggest economy is losing steam.
"I think we will see a weak payrolls number," said Fred
Goodwin, cross-asset strategist at State Street.
"But we'll have to wait and see if that is a
bad-news-is-good-news situation, or if the market will, at some
point, begin to really take on board the fact that the data is
weakening much more than they thought and it will be an adverse
The jobs data caps a big week for financial markets that has
seen the U.S. Federal Reserve recommit to its aggressive
monetary policy easing and the ECB cut rates to record lows and
signal further policy easing may lie ahead.
The moves come just a month after the Bank of Japan promised
to inject about $1.4 trillion into its economy to spur growth
and end decades of deflation.
By increasing liquidity, three of the world's major central
banks have fuelled a rally in share and bond markets that has
driven many benchmark indexes back up to levels last seen before
the financial crisis began, though their actions come in
response to signs the global economic recovery is faltering.
MSCI's world equity index, which tracks
prices in 45 countries, gained 0.1 percent on Friday to hold
around levels last seen in June 2008.
Europe's broad FTSEurofirst 300 index of leading
shares dipped slightly but at 1,206.50 points was close to
March's closing high of 1,207.83, its highest finish since
August 2008. The index has gained 5.1 percent since mid-April,
despite a disappointing earnings season.
However, Europe's STOXX 50 Volatility Index, which
gauges investors appetite for equities, hit a six-week low,
signalling that demand is likely to pick up following the ECB
London's FTSE 100, Paris's CAC-40 and
Frankfurt's DAX were between 0.1 and 0.2 percent
Earlier in Asia, MSCI's broadest index of Asia-Pacific
shares outside Japan edged up to end the week
with gains of just over 1 percent, though trading was subdued
with Tokyo closed for holidays.
The euro gained against the dollar after a broad sell-off on
Thursday when the ECB cut its main rate by a quarter percentage
point to a record low of 0.5 percent, the first cut in 10
months. The bank also pledged to provide as much liquidity as
the region's banks need well into next year.
The main reason for the sell-off was a statement from ECB
President Mario Draghi that the bank could cope with the
consequences of cutting its deposit rate below the current zero
percent. Such a move would effectively charge banks to hold
their money overnight, in a bid to encourage them to lend money
and support the recession-hit euro area.
The single currency gains on Friday came when an ECB
policymaker, Ewald Nowotny, said the markets might have
over-interpreted those comments about negative interest rates.
The euro was trading around $1.3110, up about 0.4
percent for the day, but well down on a two-month high of
$1.3243 set on Wednesday.
The dollar meanwhile was weaker against a basket of major
currencies as investors focused on whether the upcoming jobs
report will add to concerns about the U.S. economy and boost
bets on more monetary easing.
"If we have a weak number, expectations will grow for the
Fed to act," said Geoffrey Yu, currency strategist at UBS.
The dollar index was down 0.2 percent at 82.03,
though the greenback was steady against the yen at 98.09 yen
due to a holiday in Japan.
Most euro zone bond yields were lower as the ECB decision to
take action to improve the outlook for the region lifted demand
for bonds offering higher returns than safe-haven German debt.
French, Austrian and Belgian 10-year yields fell to new
record lows of 1.65 percent, 1.435 percent and 1.903 percent,
respectively, while Spain's fell below 4 percent for the first
time since October 2010.
The premium demanded by investors to hold 10-year Italian
bonds compared with German bonds narrowed to 255 basis points
and not far from its tightest level since July 2011.
German 10-year yields were 2 basis points
higher at 1.18 percent, just above last July's record low of
"Inflation fears are basically vanishing, and investors are
buying the whole euro zone fixed income," said Christian Lenk,
rate strategist at DZ Bank in Frankfurt.
The proof provided by the ECB that the world's big central
banks remain firmly committed to supporting their respective
economies helped lift commodity markets.
Copper was the standout performer and was on course
for its best day in four months, with a jump of more than 2
percent as investors took the view that the central banks moves
to stimulate growth would boost demand for industrial metals.
Those hopes helped lift Brent crude 68 cents higher at
$103.53 a barrel, while U.S. crude was up 56 cents at
However, commodities continue to lag behind stocks and
analysts say that, while stocks are being propelled by cheap
central bank money, raw materials will remain linked to the weak
global economic data.