Europe shakes off ECB doubts before US jobs data

The skyline of the banking district is pictured in Frankfurt, October 21, 2014.

LONDON - Worries over spluttering growth and a downturn in commodity markets put world stocks on course for their first weekly decline in a month on Friday, as investors awaited their monthly instalment of US jobs data.

Europe reclaimed some of the ground it had lost on Thursday, but after another frenetic week for markets which has seen the dollar continue to rally and oil prices slip, investors were trying to catch their breath before the 1330 GMT payrolls data.

Economists polled by Reuters expected it to show 230,000 new jobs were added last month and the unemployment rate remained at 5.8 per cent, bolstering the view that the United States remains a pillar of strength for a struggling global economy. ECONG7

The US Federal Reserve "will want to see the 'underemployment' rate fall further and they want the hourly earnings growth to rebound to 3-4 per cent," said Philip Marey, a US-focused Rabobank economist. "That is what is becoming increasingly important."

As the data approached, the dollar was at a seven-year high against the yen JPY= and a 5 1/2-year high against other major currencies .DXY. Futures prices ESc1 pointed to modest gains for US stocks, already near record highs.

The dollar's momentum was helped by a Wall Street Journal report that simulations by Federal Reserve economists suggest it would be best to raise interest rates promptly. The US currency rose past 120.50 yen and to $1.2350 to the euro. EUR=

Unlike the United States, Europe, China and Japan are all losing momentum. Germany's Bundesbank halved its 2015 growth forecast for Europe's largest economy on Friday.

But that is also encouraging big central banks like the ECB, Bank of Japan and China to consider new stimulus. Chinese stocks .CSI300 have soared over 11 per cent this week on hopes its interest rates will fall further.

However, broader worries about global growth have world stocks .MIWD00000PUS overall heading for their first weekly drop in four. Emerging markets have suffered in particular, because they tend to be sensitive to commodity prices and global interest rate expectations. MSCI's emerging market index .MSCIEF was down almost 2 per cent on the week.

The rouble RUB= -- down almost 40 per cent since June-- rose 2 per cent against the dollar and euro. Traders in Moscow said the Russia central bank was intervening in the currency market again on Friday.

Ukraine disclosed its foreign currency reserves were now at 10-year low of just $9.97 billion after it burned through another 20 per cent last month.

GOLD SHINES

Brent crude oil LCOc1 was back below $70 a barrel after Saudi Arabia cut prices. That left crude heading for a 10th weekly fall in 11.

In contrast to oil, gold was heading for its biggest weekly gain in 10 months as the prospect of central bank stimulus in the euro zone, China and Japan boosted demand for the metal as an inflation hedge.

Spot gold XAU= was little changed at $1,205.60 an ounce, but there was also caution ahead of the upcoming US jobs data.

"Should (payrolls) numbers exceed 230,000 it could send gold tumbling quickly," said Howie Lee, an analyst at Phillip Futures, adding that support could come in at $1,140.

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