Asian shares slump, euro wallows near lows

By Lisa Twaronite

TOKYO (Reuters) - Asian shares edged down on Friday ahead of U.S. employment data later in the session, while the euro wallowed around two-year lows after European Central Bank President Mario Draghi vowed to take more easing steps to spark growth in the euro zone.

Investors were likely to remain cautious ahead of the key U.S. nonfarm payrolls report. Solid gains in employment are projected, and could increase speculation the Federal Reserve could raise U.S. interest rates in the middle of next year.

"The market is positioned for a big number," Chris Weston, chief market strategist at IG Markets in Melbourne, said in a note. IG Markets predicted Britain's FTSE 100 (FTSE) would edge up 11 points, or 0.1 percent, France's CAC 40 (FCHI) would open up 13 points, or 0.3 percent, and Germany's DAX (GDAXI) would open 36 points higher, or 0.3 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) was down about 0.2 percent, on track for a weekly loss of about 1.8 percent.

Japan's Nikkei stock average rose 0.5 percent, gaining 2.8 percent for the week following the Bank of Japan's surprise announcement of more easing steps on Oct. 31.

"Valuation is still cheap, but people are cautious as the market seems overheated," said Jun Yunoki, a strategist at Nomura Securities in Tokyo.

On Thursday, Wall Street rose in a volatile session, with the Dow Jones industrial average (DJI) and S&P 500 (SPX) hitting record closing highs. European shares posted modest gains after Draghi said further stimulus steps mean the ECB's balance sheet would be as large as it was in March 2012, when it grew to 3 trillion euros.

Draghi's remarks came after the ECB kept interest rates at a record low of 0.05 percent.

"As long as there is a risk of additional easing from the ECB, the euro will remain under pressure," said Kathy Lien, managing director at BK Asset Management in New York, in a note to clients.

But with speculators holding the largest amount of euro/dollar short positions since July 2012, the single currency is vulnerable to a short squeeze up to $1.2600, she added, and said she viewed any euro rallies as an opportunity to sell before its eventual move down to $1.2250.

In Asian trading, the euro edged up to $1.2384 after brushing a more than two-year low of $1.2368.

The dollar bought 115.28 yen , not far from a fresh 7-year peak of 115.52 touched overnight.

Japanese cabinet ministers expressed concern about the yen's rapid fall, suggesting that the government may be trying to ward off criticism that it is intentionally devaluing its currency to boost exporters' competitiveness.

Later on Friday, U.S. nonfarm payrolls are expected to show a rise of 231,000 jobs last month after increasing 248,000 in September, according to a Reuters survey of economists. The jobless rate is seen steady at a six-year low of 5.9 percent.

U.S. data on Thursday showed the number of Americans filing new claims for unemployment benefits fell more than expected to 278,000 last week, compared with forecasts of 285,000. Claims have now been below the 300,000 threshold for eight straight weeks, suggesting that employment growth was gaining momentum.

The Australian dollar fell to its weakest since July 2010 and was last flat on the day at $0.8557. In its quarterly monetary policy report, the Reserve Bank of Australia highlighted the strong local currency as a key source of uncertainty as the central bank forecast sub-par domestic growth.

In commodities trading, spot gold was steady at $1,141.70 an ounce, not far from a 4-1/2 year low and set to post its third straight weekly drop.

The stronger dollar and supply fears continued to pressure oil prices. Brent dropped about 0.5 percent to $82.40 a barrel, while U.S. crude fell about 0.3 percent to $77.69.

(Additional reporting by Ayai Tomisawa; Editing by Jacqueline Wong)