Investors keep powder dry ahead of US payrolls

By Huw Jones

LONDON (Reuters) -Global shares eased on Friday as investors played safe ahead of key U.S. jobs numbers before the opening bell on Wall Street as geopolitical tension kept crude oil above $90 a barrel.

Shares were off their lows in Europe as U.S. stock index futures,, traded higher, recovering some ground after the three key U.S. indexes fell more than 1% each on Thursday on hawkish Fed comments and Middle East tension.

U.S. non-farm payroll numbers for March are due at 1230 GMT, before the opening bell on Wall Street, with economists expecting a rise of 200,000, compared with 275,000 in February, while the unemployment rate is likely to keep steady at 3.9%.

"We think a print below 200,000 should put pressure on the dollar, endorsing the recent signs that the employment story is softening and that the Fed will be in a comfortable position to start cutting in the summer," ING bank analysts said in a note.

Once the payrolls are digested by markets, investors will look to next week's U.S. CPI inflation data for March to feed their Fed bets.

The dollar firmed against peer currencies after rebounding from a two-week low, while gold was headed for its third straight week of gains, underpinned by safe haven flows.

The threat of supply disruptions from prolonged conflict in the Middle East kept Brent oil futures above $90 a barrel, a level not seen since October, with prices heading for their second weekly gain. [O/R]

The MSCI All Country stock index was down 0.3% at 770.8 points as it continued to ease in the first week of the quarter after hitting a lifetime high at 785.62 points on March 21.

In Europe, the STOXX index of 600 companies dropped to more than a two-week low, with the benchmark on track for its worst day since mid-October. It was down 1.1% at 505.12 points after Tuesday's lifetime high of 515.77 points.

A cooling U.S. services sector and comments this week from Fed Chair Jerome Powell reinforced the view that rate cuts were likely to commence at some point this year.

However, some other Fed officials have taken a more conservative view, with Minneapolis Fed President Neel Kashkari, in particular, striking a more hawkish stance overnight, saying rate cuts might not be required this year if inflation continues to stall.

"It's the first time I've heard those kind of statements, so the markets sold off, and at the same time we had a flare-up in geopolitical tensions in the Middle East," said Mark Ellis, CEO of Nutshell Asset Management.

So far, however, there appears to be a healthy pullback in markets after grinding higher in a very tight trendline to leave it looking a bit stretched, Ellis said.

He pointed to a jump in the VIX, Wall Street's "fear gauge", which posted its highest close since Nov. 1.

"It suggests we are at a bit of a turning point now, whether this is a natural pullback in a bull market, or whether it's going to turn into something a little bit more," Ellis said.

ASIA EASES

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.45%, tracking a late tumble on Wall Street as risk aversion dominated the market mood. The index was set to end the week little changed.

A holiday in China also made for thinner trade.

Tokyo's Nikkei fell 2%, pressured in part by a stronger yen, thanks to the prospect of further rate hikes there and more jawboning from Japanese officials. [.T]

Hong Kong's Hang Seng Index was little changed.

Fed officials' comments supported the dollar against a basket of currencies, lifting it away from a two-week low hit after a downbeat U.S. services survey.

The euro was little changed, and the yen edged up.

Fed fund futures point to just under 75 basis points worth of easing this year, closer in line with the Fed's projections and a significant pullback from nearly 160 bps worth of cuts priced in at the start of the year.

That shift has left U.S. Treasuries struggling, with the 10-year yield hovering near its highest in more than three months, last at 4.331%. [US/]

The two-year yield firmed at 4.664%. Bond yields move inversely to prices.

In commodities, Brent crude edged up 0.3% to $90.91 a barrel, after striking a more than five-month high on Thursday.

U.S. crude was slightly firmer at $86.67 per barrel.

Gold gained 0.13% to $2,292 an ounce, nearing its record high on Thursday. [GOL/]

(Reporting by Rae Wee and Huw Jones; Editing by Tom Hogue, Clarence Fernandez and Nick Macfie)