Buoyant world stocks await payrolls, ECB inaction spurs euro
Mar 07 2014 , London
With the tussle between Ukraine and the West and Russia over Crimea expected to drag on, investors turned their focus to non-farm payrolls due at 1330 GMT, though there was a sense they would still be distorted by the recent icy U.S. weather.
European stock markets opened a shade lower as they consolidated after a volatile, but still positive week which has left equity markets globally at their highest level in more than six years.
There appeared to be no stopping the euro meanwhile, as it hit a fresh high of the year of $1.3876 on the dollar. It had surged on Thursday after the European Central Bank all but killed off bets of further interest rate cuts in coming months.
"The market was looking for some action from the ECB, yet we got nothing, in fact what Draghi outlined was the improvement in the economic activity," said Jane Foley, senior currency strategist at Rabobank in London.
"It actually gives us the impression that that might be it from the ECB and we have seen everything we are going to see."
With the jobs data later key for the Federal Reserve as it gradually scales back its massive stimulus programme, the figures dominated attention across most assets classes.
The dollar index .DXY, which weighs the dollar against a basket of major currencies, was at 79.614, after skidding as low as 79.590, its lowest since late October, in wake of the euro's surge.
A Reuters poll of economists expected around 149,000 jobs to have been added up from the weather-depressed gains of 113,000 in January, though that was taken before Wednesday's soft ADP jobs report.
Speaking in London late on Thursday, Fed policymaker Charles Plosser said he would take the reading "with a pinch of salt" whatever it was, and that it was likely to be "a couple more months before all the noise of the weather gets filtered out.
This week's escalation in tensions between Ukraine and the West and Russia over Ukraine's mainly Russian speaking Crimea peninsula continued to give support to safe-haven assets.
After an hour-long phone call between Vladimir Putin and Barack Obama, the Russian President rebuffed the U.S.'s warning over Moscow's military intervention in Crimea and said the two leaders were still far apart on the situation.
Gold held steady at $1,347 an ounce in early London trade after its sharp overnight rise to near a four-month high. It was poised to log its fifth straight week of gains as a weaker dollar and the geopolitical tensions boosted its appeal.
The metal has gained nearly 9 percent in the last five weeks, though investors shied away from making any further big bets ahead of the U.S. jobs report.
"If the situation in Ukraine gets worse, prices will go higher. However, if the crisis is resolved, gold could fall back to $1,320," said Yuichi Ikemizu, branch manager for Standard Bank in Tokyo.
U.S. Treasuries as well as benchmark German government bonds also made small price gains, though U.S. yields - which move inverse to prices - were near a two week high.
Though it is showing signs of strengthening again, the correlation between U.S. Treasuries and the dollar/yen had somewhat broken down during the Ukraine turmoil as safe-haven flows have bolstered the yen.
The rouble was steady near its all-time low versus the dollar. In other emerging currencies, China's yuan continued to recover from a drastic slide in recent weeks as the central bank firmed the official rate.
China's money rates have slid this week despite fears that the country may suffer its first public corporate bond default, with traders saying the government's behaviour implies it might be abandoning its earlier tightening policy.
In a reminder of the geopolitical risk from the Ukraine/Crimea crisis, U.S. crude oil futures added about 0.3 percent to $101.90 a barrel, as the market watched for any disruption of oil and gas supply from Russia to Europe.
Brent also rose about 0.3 percent to $108.16 a barrel. But both benchmarks were on track to end the week down, with Brent heading for a second straight weekly decline and the U.S. contract for its first drop in eight weeks.