Sunday 14 Jul 2024
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(22/10/13 19:37:50)

* Dollar edges up vs euro, yen after recent battering
* U.S. nonfarm payrolls for Sept due at 1230 GMT
* European, Asian shares-ex Japan edge back from 5-year high
* Bond, commodity markets quiet, ahead of U.S. data

LONDON (Oct 22): The dollar edged away from an eight-month low and shares halted on Tuesday, before the release of U.S. jobs figures, delayed by this month's acrimonious budget tussle in Washington.

Some investors fear the September non-farm payrolls data, usually closely-watched by markets, may already be out of date, although a strong report at 1230 GMT could revive bets that the Federal Reserve will begin scaling back its stimulus this year.

"Markets are going to be quite nervous and swinging around on the employment data," said Daniel Loughney, a portfolio manager at Alliance Bernstein.

"Unless we get a very clear number, the volumes are going to be staying low — the markets are voting with their feet."

The figures are forecast to show that employers added 180,000 jobs last month. Many in the markets expect that the U.S. central bank will delay trimming its $85 billion of monthly bond-buying, which has supported riskier assets like shares, at least until the impact of the partial government shutdown becomes clearer.

There was little conviction in any of the major asset classes, as the data release approached.

The dollar added 0.1 percent against a basket of major currencies, as investors took the opportunity to hedge some of their bets, after the greenback's near-6-percent drop over the last few months of U.S. policy uncertainty.

European shares were largely unchanged, ahead of what was expected to be a flat start on Wall Street, with buyers happy to sit on the sidelines, after world stocks hit five-year highs on Monday.

There was also a reluctance to make aggressive bets, after U.S. stocks ended little changed on Monday, partly on concerns that equities have become overpriced, after the S&P 500 index's run to record highs last week.

"I think when you look at the geographical split, it seems that the U.S. market is getting a bit more fully-valued and that it is Europe where there is more room for some upside," said Sybren Brouwer, head of equity strategy at ABN Amro.

Dollar finds feet

The dollar has borne the brunt of the recent volatile U.S. conditions, firstly after the Fed opted against cutting its stimulus in September, and then as the budget spat, and 16-day shutdown in Washington pushed the country close to a default.

By 1130 GMT, it was holding up 0.1 percent at $1.3675 to the euro, off an eight-month low of $1.3704 marked on Friday, and gained by similar margin against the yen, at 98.35 yen, adding to Monday's 0.4 percent bounce.

"A (jobs) reading anywhere in the 160,000 to 190,000 range, would probably be fairly neutral with respect to near-term U.S. dollar direction, given the data pre-dates any impact from the October shutdown," BNP Paribas analysts wrote in a note.

"We remain short euro/dollar and sterling/dollar heading into the release, looking for gradual improvement in U.S. data."

Europe's bond markets were seeing little movement ahead of the data, with benchmark German Bunds and euro zone periphery debt, all broadly steady.

It was a similar story for commodities. Gold inched down to $1,313.15 an ounce, while U.S. and Brent crude prices hovered at $99 and $110 a barrel respectively, after rising stockpiles of oil saw U.S. prices hit near four-month lows on Monday.

Trapped in QE

In Asia, MSCI's index of Asia-Pacific shares outside Japan edged back from a five-month peak, although Tokyo's Nikkei bucked the trend, as did Australia's S&P/ASX 200, as it logged its sixth day of gains.    

Many analysts expect the Fed to maintain its quantitative easing (QE), given the likely economic impact of the shutdown and the prospect of another bitter budget fight early next year, which should continue to support riskier assets.

Charles Evans, a senior Fed policymaker, said on Monday that it would be "tough" for the U.S central bank to have enough confidence in the strength of the recovery, to start reducing its bond-buying by the time of its December meeting.

"The common view in the market is that the U.S. is essentially trapped in QE," said Andrew Quin, research strategy coordinator at Patersons Securities in Perth, Australia.

"So at least until new debt ceiling negotiations get agreed, probably in February, we doubt they are going to do too much."

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