Dollar climbs, stocks steady as markets await US data

TOKYO/LONDON: The dollar hit a multi-week high on Friday while European stocks, oil and gold steadied as markets held their breath for a US jobs report seen as a critical signal for economic recovery and a possible easing of stimulus measures.

US Treasury yields firmed after jumping overnight, while the dollar held onto its biggest gain since April with other currencies subdued ahead of the crucial US nonfarm payrolls data release.

The pan-European STOXX 600 index was up 0.1% by 1137 GMT, trading just below its record high touched earlier this week, and contrasting with an earlier 0.3% fall in MSCI's broadest index of Asia-Pacific shares outside Japan .

The US Labor Department's report at 8:30 a.m. ET (1230 GMT) was expected to show 650,000 new jobs added to nonfarm payrolls in May, after an unexpected slowdown in the labor market in April.

A stronger-than-expected reading could heighten worries that the robust economic recovery could push the Fed to contemplate paring back its bond buying and raising interest rates.

Stock markets were listless ahead of the jobs data release, with Japan's Nikkei earlier falling 0.4% while the broader Topix was about flat.

Airlines suffered, with British Airways-owner IAG, Wizz Air and easyJet slipping between 1%-2% after Britain added seven countries, including Egypt and Sri Lanka, to its "red list" of destinations that require hotel quarantine on return to England.

US stock futures, the S&P 500 e-minis, rose slightly, following a 0.4% loss for the index overnight.

The 10-year Treasury yield held at 1.6284%, after advancing nearly four full basis points overnight.

The dollar index held Thursday's 0.7% rally, its biggest since April, to hover around 90.55.

TAPER TALK

While Fed officials have consistently said they expect current inflationary pressures to be transitory and for ultra-easy monetary policy to stay in place for some time, they are also increasingly touting the need to at least start talking about a tapering of stimulus.

Investors have been carefully parsing the economic data to gauge if inflation could prove sticky enough to force the Fed's hand on tapering.

Last month, much-lower-than-expected nonfarm payrolls numbers knocked back those expectations, weakening Treasury yields and the dollar.

"Clearly, traders are covering USD shorts into the jobs data," Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a note to clients. "I am not even going to try and predict this one, it is a lottery, although the so-called 'whisper number' is closer to 790,000."

Copper prices rebounded as investors scooped up material at lower prices. Three-month copper on the London Metal Exchange gained 0.8% to $9,870 a tonne, having tumbled as much as 3.8% in the previous session.

Gold stabilised after a 2% tumble on Thursday, its biggest since February, to trade flat around $1,870 per ounce by 1137 GMT.

Oil rose towards $72 a barrel, trading close to a two-year high as OPEC+ supply discipline and recovering demand countered concerns about patchy COVID-19 vaccination rollouts around the globe.

Brent futures rose 11 cents to $71.42 a barrel, after reaching the highest since May 2019 in Thursday's session. US WTI added 17 cents to $68.97 a barrel, just below $69.40 a day earlier, the strongest since October 2018.