April 4, 2014 / 8:36 AM / 4 years ago

GLOBAL MARKETS-Mood cautious before US jobs data, euro nurses losses

* Markets in cautious mood ahead of US jobs report
    * Dealers: market now looking for figure near 220,000
    * Euro lower after ECB steps up easing rhetoric
    * Jobs data seen as big test of recovery hopes

    By Marc Jones
    LONDON, April 4 (Reuters) - Investors took to the sidelines
ahead of what was expected to be an encouraging U.S. employment
report on Friday, while the euro nursed losses after the
European Central Bank opened the door to more aggressive easing
if needed.
    The March U.S. non-farm payrolls report will serve as a test
of the argument that the economic weakness of January and
February was due to bad weather and the recovery of the world's
biggest market is still on track.
    Median forecasts are for a rise of 200,000 in payrolls,
though dealers said the market was now edging more towards
something nearer 220,000, which would reassure the optimists and
tend to underpin the dollar and stocks.
    "We're pretty upbeat about the payrolls," Fahran Ahmad, a
trader at Tradenext, said. 
    Early futures prices pointed to a cautiously positive
start for Wall Street, although pricing was little more than
speculation with the jobs data due out at 1230 GMT, an hour
before New York trading resumes.    
    World shares, after wobbling in February and
March, have returned to six-year highs this week and were
heading for their third consecutive week of gains.
    European shares were in a pre-jobs data holding
pattern as midday approached, but a slender 0.1 percent gain put
them on course for their ninth positive session.
    Most attention, however, remained on the euro and southern
European bonds after Thursday's declaration from the ECB that it
was now seriously considering the kind of aggressive asset
buying employed by the United States, Japan and Britain.
    The euro sagged to a fresh five-week low of $1.3694 
as it headed for a third week of net losses against the dollar,
while the government bonds of Greece, Spain, Italy, Ireland and
Portugal all made ground. 
    The wait for the U.S. jobs figures limited moves elsewhere.
The dollar index steadied after hitting its highest level
since Feb. 27 while U.S. government bond yields were
at a standstill at 2.7935 percent.
    The dollar also pared gains on the yen to 103.85,
having topped 104 for the first time since January.
    "Some voices are talking about targets of 108, 110 yen for
the dollar again," said Masashi Murata, senior currency
strategist at Brown Brothers Harriman.
    In subdued Asian trading, MSCI's broadest index of
Asia-Pacific shares outside Japan had barely
budged, while Japan's Nikkei eased a fraction, with a
softer yen providing some support.
    A much stronger than-expected payrolls report might not be
so positive for U.S. shares as it could reignite speculation of
an earlier rate hike from the Federal Reserve.
    Likewise, a weak number was likely to hurt the dollar and
boost Treasuries, but the impact on equities might be tempered
by expectations monetary policy would stay looser for longer.
    U.S. data so far this week has been too mixed to draw any
firm conclusions on the outlook for policy.
    Manufacturing and car sales figures have been generally
encouraging, but an unexpected widening of the U.S. trade
deficit on Thursday implied net exports were a much bigger drag
on the economy last quarter than first thought. 
    Indeed, RBS halved its first-quarter growth forecast for the
United States to an annualised 0.6 percent.

    In Europe, focus remained on what looks to be an increasing
divergence between the ECB's policy outlook and those of the
Federal Reserve and Bank of England.
    Crucially, ECB head Mario Draghi declared on Thursday the
bank's members were "unanimous" on using unconventional easing
if needed. That marked a major change as some countries, notably
Germany, have long opposed steps such as quantitative easing.
    European bond yields fell as a result and even Greek 30-year
bond yields slipped below 6 percent for the first
time since the global financial crisis.
    The relentless rally in Greek bonds seen over the past two
years could be given a further leg up later on Friday, with
ratings agency Moody's widely expected to lift at least the
rating outlook of the euro zone's weakest member.
    "There is talk among investors that the country could return
to market as early as next week if Moody's do upgrade it," said
a trader at a market maker in Greek government bonds, referring
to Athens' plans to issue a 2 billion euro five-year bond soon.
    In commodities markets, one of the few movers was aluminium
, which was on track for its biggest weekly gain in 16
months as a series of capacity cutbacks by top producers
underpinned the market.
    Spot gold floated up to $1,292 an ounce, but was
still uncomfortably close to the two-month trough of $1,277
touched early this week. It was also facing a third straight
week of losses for the first time in more than six months.
    Oil was also under pressure as the prospect of Libya's main
ports reopening left it facing its biggest weekly fall in three
months. Brent steadied at $106.50 a barrel after a
bounce of 1.4 percent on Thursday, while U.S. crude added
70 cents to $101.02 a barrel.

 (Additional reporting by John Geddie and Francesco Canepa in
London; Editing by Louise Ireland and Susan Fenton)

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