A look at the day ahead in European and global markets from Kevin Buckland
Some welcome calm in markets on Friday, but the worry is that it precedes a storm: U.S. payrolls data looms large at a time when questions about just how hawkish the Fed needs to be has whipsawed every asset class.
It has already been an exhausting week, witnessing Treasury yields march to ever higher 16-year peaks, crude oil collapse from near $100 a barrel, world equities dip to the lowest since March, and the yen mysteriously bounce from the closely watched 150 per dollar level.
Today, U.S. yields have found a place to rest at 4.72%, the yen is sitting comfortably around 148.50, and Brent is building a floor above $84. APAC stocks are firm, including a welcome 1.8% rally in Hong Kong that paints a rosier backdrop for the mainland market's return from a weeklong holiday on Monday.
There is little on Europe's data calendar to draw focus away from U.S. unemployment for long. If sentiment holds in Asia, European stocks can hope to build on yesterday's rebound from March lows.
One enclave of market idiosyncrasy that bond investors will want to keep an eye on though is the upward pressure on Japanese yields.
A sorry 30-year Japanese government bond auction on Thursday sent a worrying signal about how little investors appreciate the Bank of Japan's heavy-handed stimulus, with unscheduled yield-suppressing operations taking place on Monday, Wednesday and Friday this week.
BOJ actions also run counter to the government's desire to put a floor under the yen. Officials still refuse to comment on whether they were behind Tuesday's sharp rebound, but the central bank's own data suggests Tokyo has yet to step into the market.
Developments that could influence markets on Friday:
-German industrial orders , manufacturing output, consumer goods (all Aug)
-UK house prices (Sep)
-US non-farm payrolls (Sep)