By Amanda Cooper
LONDON, Jan 7 (Reuters) - The dollar edged above last week's
one-month lows struck after weak U.S. jobs data, which helped
boost European equities, while government bond prices edged down
from their recent highs.
Oil and gold rose, although both commodity prices had come
under pressure earlier as concern persisted over the outlook for
demand in light of the U.S. employment data that showed the
slowest pace in monthly jobs growth in over four years, while
gold pared earlier losses.
Friday's monthly U.S. employment report a rise of just
18,000 in the number of workers on non-farm payrolls in
December, worse than the most bearish forecast in a Reuters poll
where the consensus had been 70,000, while the unemployment rate
shot to a two-year high.
The data fuelled expectations of a 50 basis point Fed rate
cut at the end of the month rather than a cut of just 25 basis
points, and sparked a sharp sell-off in the dollar and global
equities on Friday.
The dollar may have risen above last week's low, but such
weak data has all but guaranteed another rate cut from the
Federal Reserve as it attempts to ward off the slightest hint of
recession.
"The dollar is showing some resilience. It's made a
relatively strong start to the week but we don't expect that to
continue," said Phyllis Papadavid, currency strategist at
Societe Generale.
Fed Chairman Ben Bernanke speaks on Thursday and investors
will be keen to hear his take on the jobs report and what it
means for the future path of U.S. monetary policy.
The dollar fell by more than 8 percent against a basket of
major currencies in 2007 as the combination of a global
liquidity crisis, the slowing housing market, record high oil
prices and patchy data cast doubt on the economic outlook.
By 1354 GMT, the dollar index was at 75.998, still up 0.1
percent on the day but down from an earlier high of 76.338, a
full 1.2 percent above Friday's low of 75.429.
EQUITIES ECHO DOLLAR
European equities <> managed to shrug off widespread
weakness on global stock markets, after shares fell in Asia.
The FTSEurofirst 300 index of top European shares was up 0.4
percent at 1,462.84 points, having pared an earlier 0.4-percent
loss as investors scooped up so-called defensive stocks such as
oil shares, telecoms and pharmaceuticals.
The index fell by almost 2 percent on Friday after the U.S.
jobs report, making this its worst daily fall in about a month.
"We've had a huge barrage of very bearish statistics last
week from the U.S. and it's obviously weighing on the market,"
said Edmund Shing, strategist at BNP Paribas in Paris.
"The question this week is: 'are we ready for a short-term
bounce, or are we going to crack through the support levels and
go further down?' My view is that we'll get a small bounce
because we're getting oversold on a number of indices," he said.
On Monday, shares in miners -- among those worst hit on
Friday by concerns over the outlook for U.S. growth -- extended
losses. Swiss group Xstrata was the worst performer among the
miners, falling 2.5 percent.
Swiss food producer Nestle <NESN.VX> and British drugs firm
GlaxoSmithKline <GSK.L> were the two largest positive influence
on the broader market, rising 3.1 and 3.4 percent, respectively.
U.S. stock futures <DJH8> <SPH8> <NDH8> were up between 0.3
and 0.5 percent, suggesting shares on Wall Street may rise in
early trade after suffering their worst performance in the first
three trading days of the year since the Great Depression.
With equities staging a modest rise, euro zone government
bond prices came under pressure, retreating from Friday's
three-week highs.
Yields on the two-year Schatz <EU2YT=RR> -- often viewed as
the most sensitive to investor thinking on the likely course of
monetary policy -- were at 3.810 percent, compared with 3.749
percent late on Friday, in their first rise for a week.
Fixed income investors expect the European Central Bank to
leave euro zone interest rates at 4 percent at its policy
meeting on Thursday.
But uncertainty over the outlook for the economy will likely
keep short-term bond yields from straying too far from current
levels.
ECB President Jean-Claude Trichet told officials from the
Group of 10 leading economies in the Swiss city of Basel global
economic growth was expected to remain robust although there
were clear downside risks from the market turmoil of last year,
as well as high commodity prices.
Other traditional safe-haven instruments suffered a set-back
as investors booked profits on Friday's payrolls-inspired gains.
Oil <CLc1>, which hit lifetime highs last week at $100 a
barrel, was last up 0.2 percent at $98.09, having touched a
session low of $97.11 as concern persisted over U.S. demand in a
slowing economy.
Gold <XAU=> last week rose to record highs just below $870
an ounce and by Monday was at $863.50, showing roughly a
0.2-percent gain on levels seen late on Friday in New York.
In emerging markets, equities <.MSCIEF> fell by more than 1
percent, while bond spreads tightened <11EMJ>.
(Additional reporting by Jamie McGeever, Toni Vorobyova and
George Matlock and Anshuman Daga)
