By Jeremy Gaunt, European Investment Correspondent
LONDON, April 4 (Reuters) - The dollar was weaker and
European stocks firmer on Friday before U.S. jobs data which
should guide investors on the state of the world's largest
economy and prospects for consumer spending there.
Asian shares were generally lower with Japanese stocks
falling relatively sharply on profit taking from recent gains.
The focus across financial markets is the release of U.S.
non-farm payroll data for March at 1230 GMT. These figures are
always a key indicator but investors are awaiting them even more
than usual because of the U.S. economy's weakness.
"Non-farm payrolls are expected to fall once again with the
unemployment rate pushing up to 5 percent," ING said in a note.
"Confidence is fragile and more negative news ... will only
reinforce the belief that the U.S. is already in recession."
Late last week, economists polled by Reuters offered a
median forecast that 60,000 jobs were shed in March, marking a
third month in a row that employment has decreased.
There have been mixed signals since then, however.
Investors will be particularly keen this month to see what
impact the slowing U.S. economy is having on consumers through
jobs prospects. Consumer spending has held up relatively well so
far during the economic slowdown.
Expectations of U.S. interest rate cuts have also cooled
recently, so a worse-than-expected figure could re-stoke the
view that the U.S. Federal Reserve will have to take more action
to ease monetary policy.
That would hurt the dollar and boost currencies such as the
euro and yen, spilling over into other assets such as equities
and government bonds.
WEAKER DOLLAR
Foreign exchange markets appeared to be positioning for a
poor payrolls number. The dollar index <.DXY>, which tracks the
greenback against six major currencies, was down 0.1 percent.
The euro <EUR=> was up about 0.2 percent at $1.5712 and the
dollar was up 0.1 percent against the yen <JPY=> at 102.39 yen.
"Even if the (jobs) figure comes in around zero, from a
fundamental point of view that's still negative for the dollar
because that will not stop the uptrend in the unemployment
rate," said Antje Praefcke, currency strategist at Commerzbank
Corporates & Markets in Frankfurt.
European stocks gained some ground but investors remained
cautious before the jobs data. The FTSEurofirst 300 <>
index of top European shares was up 0.3 percent.
Earlier, Japan's Nikkei stock average <> slid 0.7
percent, although it ended the week up 3.7 percent, its third
successive week of positive finishes.
"The market has returned steadily in the last few days so
it's not at all unnatural for people to want to take a bit of
profit," said Takashi Ushio, head of the investment strategy
division at Marusan Securities.
Short-term euro zone government bonds <EU2YT=RR> sold off
slightly, with the yield up 3 basis point at 3.507 percent.
Ten-year bond yields <EU10YT=RR> were flat at 3.986 percent.
