* Investors trim stock holdings before U.S. jobs data
* Rising expectations of early interest rate hike
* Weak euro zone manufacturing survey further hits sentiment
By Blaise Robinson
PARIS, Aug 1 Shares tumbled worldwide and the
dollar rose on Friday amid expectations a U.S. jobs report would
strengthen the case for an early interest rate rise by the U.S.
U.S. non-farm payrolls, due at 1230 GMT, are expected to
show the United States added 233,000 jobs last month and the
unemployment rate held steady at 6.1 percent.
While encouraging for the global economy at large, strong
job numbers would fuel expectations the Fed will raise rates
soon. The U.S. central bank's ultra-loose monetary policy has
helped drive a two-year rally in equity markets.
"The market now believes the Fed will move sooner rather
than later, and the momentum is turning against the 'safe play
of being long equities'," said Steen Jacobsen, chief investment
officer at Saxo Bank, in Copenhagen.
Those views got some confirmation when Dallas Federal
Reserve Bank President Richard Fisher told a television
interviewer it was "very possible" the Fed would start raising
rates early next year if the economy kept improving. Speaking on
CNBC on Friday, Fisher declined to specify when he expects the
Fed to move.
The MSCI All-Country World index was down
0.5 percent and the pan-European FTSEurofirst 300 index
dropped 1.3 percent, hitting a 3 1/2-month low. Worries over
Argentina's default and sanctions against Russia also weighed on
the market. U.S. stock index futures were also sharply
Stocks had started to retreat as expectations of monetary
tightening rose, following strong data on U.S. GDP and labour
costs earlier this week. Tensions in Ukraine and the Middle East
also pulled shares lower.
"Markets are fairly effectively pricing in future rate
increases. As long as that's the case, we are confident we won't
see any cataclysmic event on the fixed-income side of our risk
parity portfolio," said Stuart MacDonald, managing director of
hedge fund Aquila Capital.
Also rattling investors, the threat of a conflict between
Russia and Ukraine was starting to affect the euro zone economy.
A survey showed on Friday the region's manufacturing growth
easing in July.
"The slowdown from the confidence peak earlier this year is
noticeable," Christian Schulz, senior economist at Berenberg
Bank in London. "Especially in Germany, it reflects the Putin
factor, which has aggravated the problems of an already troubled
The dollar hovered around 10-month highs against a
basket of currency, on track to record a third strong week.
The cautious mood was also felt in the bond market, where
yields on the riskier Spanish and Italian bonds
Portuguese bond yields also rose on Friday,
amid expectations Lisbon will bail out the country's biggest
bank after it reported massive losses.
Brent crude oil fell to a two-week low on Friday,
slipping towards $105 a barrel as oversupply in the Atlantic
basin and low demand outweighed worries over political tensions
in the Middle East, North Africa and Ukraine.
Also on the commodities front, Gold held near a
six-week low and was on track for a third straight weekly loss.
The prospect of tighter monetary policy curbed appetite for the
yellow metal, which has historically been considered an
Nickel prices fell to their lowest in more than a month on
Friday as inventories rose. Other base metals were muted before
the U.S. jobs report.
(Additional reporting by Francesco Canepa in London; Editing by