Global stocks slide ahead of U.S. jobs data

A pedestrian looks at an electronic board showing the stock market indices of various countries outside a brokerage in Tokyo, Japan, August 27, 2015.  REUTERS/Yuya Shino

A pedestrian looks at an electronic board showing the stock market indices of various countries outside a brokerage in Tokyo, Japan, August 27, 2015. REUTERS/Yuya Shino

4 September 2015

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World shares slid towards their fourth weekly loss in the last five on Friday, as a boost from a supportive-sounding European Central Bank gave way to caution ahead of closely watched U.S. jobs data.

Rumbling concerns about China had consigned Asian shares to a seventh straight weekly loss and Europe’s markets started 1.3 to 1.6 percent in the red after gains of almost 2.5 percent on Thursday.

Those had been driven by ECB President Mario Draghi, who said the bank was prepared to expand its 1 trillion euro stimulus program aimed at lifting growth and inflation in the euro zone. But Friday’s focus was on whether U.S. jobs data due at 1230 GMT would keep Federal Reserve on track to raise its record low interest rates.

Economists polled by Reuters expect the U.S. economy to have produced 220,000 new jobs last month, continuing the robust employment creation of the past five years. Average hourly earnings are predicted to have risen by 0.2 percent, as they did in July.

If they do come in strong it will keep alive chances that a Fed hike, which would be its first in almost a decade, could come this month. Following a tough last month for global markets however, markets now see December or early next year as more likely.

“We were until recently firm Septemberists but now it’s very much on a knife edge,” said Luke Bartholomew at Aberdeen Asset Management in London.

“Market volatility has shaken them (Fed policymakers) somewhat … so seeing that markets are very fragile, do they want to shock them with hiking now? I think that is a very live debate now.”

In the currency markets, the dollar fell fractionally against the yen to 119.21 JPY= as the safe-haven Japanese unit capped a third week of gains ahead of the jobs data.

The euro also clawed back above $1.1140 having been chopped to a two-week low of $1.10875 and a four-month low against the yen EURJPY=R by Draghi’s talk of more money printing on Thursday.

The ECB also cut its growth and inflation forecasts and warned of possible further fallout from China. Coupled with a potential delay to a Fed move, euro zone bond yields fell further on Friday, with German 10-year yields DE10YT=TWEB, hitting their lowest level in nearly a week.

CRISIS PROPORTIONS

Asia’s ongoing strains remained close to surface despite hard-hit Chinese markets being closed for a second day.

MSCI’s broadest index of Asia-Pacific shares outside Japan chalked up its worst weekly losing streak since 2011 as it ended the latest one down more that 4 percent.

Japan’s Nikkei .N225 fared even worse. It fell 2.5 percent on the day and 7 percent for the week as it slumped to a seven-month low.

There was so sign of relief for the region’s emerging market currencies either.

Bank Negara Malaysia was spotted intervening to stem the ringgit’s weakness as confidence continued to be hit by a corruption scandal swirling round Prime Minister Najib Razak.

The South Korean won KRW=KFTC has slid 1.5 percent throughout this week as foreign investors have also kept selling Seoul shares .KS11., while Indonesia’s rupiah IDR=ID is down 1.5 percent.

Wading in overnight, the Institute of International Finance warned the current slump in emerging market stocks — down 40 percent since April .MSCIEF — and currencies has now reached “crisis proportions”

Even if the Federal Reserve were to hold off from raising U.S. interest rates in September, it was only likely to offer “short-term relief,” it added.

In commodities markets, which have been battered by fears of a hard landing in China, trade remained highly volatile.

After gains in early trading, Brent crude futures LCOc1 slipped 1.1 percent to $50.10 per barrel although it was clinging to a second week of modest gains.

Copper CMCU3 fell 1.2 percent to $5,181 per tonne after surging to $5,314 on Thursday, its highest in over three weeks, as bearish investors closed out positions ahead of the U.S. jobs data. Aluminum dipped back too, having also shot up to a one-month peak $1,641 a tonne.

A flood of data from China in coming weeks is likely to point to further weakness in the world’s second-largest economy, reinforcing expectations that Beijing needs to roll out fresh stimulus measures and keeping global financial markets on edge.

Tags:business, business news  financial news, business finance, small business websites

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