Stocks steady, dollar down before US jobs data

Oil prices are on course for their biggest weekly gain since March owing to a massive output cut by OPEC and other producers. ©AFP

London (AFP) - Equity markets steadied and the dollar fell Friday before all-important US jobs data that should offer clues on the pace of future interest rate hikes from the Federal Reserve.

Further US interest rate hikes are expected in the coming months to try and cool decades-high inflation.

However, markets are starting to price in a less aggressive pace of rate tightening than seen so far this year, easing fears of a global recession.

"Investors are turning more concerned about the aggressive Fed tightening and are ready to bet that the rate hikes would slow down in the next few meetings," Swissquote analyst Ipek Ozkardeskaya noted before Friday's jobs data.

Analysts expect the monthly report to show 250,000 posts were created in September, which would be the weakest since late 2020 but still a healthy figure suggesting a strong labour market.

There is a fear that a result higher than expectations could spark another sell-off across risk markets as investors bet on more bumper rate hikes.

Fed officials have consistently warned that they are determined to ramp up borrowing costs to fight inflation, even at the expense of a recession -- feeding worries among traders that the world economy is heading for such a scenario.

OANDA analyst Edward Moya said a consumer price index report next week was also on traders' radars.

"Economists are not expecting a significant drop in pricing pressures, but many traders think that a cool report could happen and that will force the Fed to change their tune next week."

While major European stock markets steadied Friday, Asian indices and Wall Street dropped overnight.

Adding to the unease was a warning from US President Joe Biden that the world faced nuclear "Armageddon" for the first time since the 1962 Cuban missile crisis.

He told a Democratic Party fundraiser in New York that Russian President Vladimir Putin was "not joking" when he threatened to use nuclear weapons over the Ukraine war.

Elsewhere, oil prices jumped and were set for their biggest weekly gain since March after OPEC and other major producers led by Russia agreed to slash daily output by two million barrels.