Shares set to end week back in black, U.S. jobs report eyed

By Ritvik Carvalho

LONDON (Reuters) - World shares hit a one-week high on Friday before easing a touch, as caution ahead of jobs data in the United States outweighed a potential breakthrough in nuclear tensions over the Korean peninsula.

The MSCI All-Country World index, which tracks shares in 47 countries was flat on the day, but set for a weekly gain of almost 2 percent. Wall Street futures indicated a positive open.

Investors' focus was mainly on the U.S. jobs report due at 1330 GMT. Upbeat jobs data last month, particularly a stronger than expected rise in wages, fanned speculation about faster interest rate rises in the United States, causing a rout in the bond market and hammering world equities.

The consensus expectation for average hourly earnings for the month is for a 0.2 percent increase, while the headline non-farm payrolls is seen to have grown by 200,000 jobs, according to a Reuters poll.

"It's expected to drop a little to 2.8 percent (year-on- year), which is still up there with the highest we've seen since the financial crisis, but if it can go above 3 percent, rate hike expectations could start to tick up again," said OANDA analyst Craig Erlam.

The U.S. Federal Reserve is widely expected to raise interest rates at least three times this year, with some analysts even expecting four.

After opening lower, pan-European STOXX 600 was up 0.1 percent by 1244 GMT. Germany's DAX was down 0.4 percent, while Britain's FTSE 100 was down 0.1 percent.

Gains for world stocks, however, came largely from shares in Asia, which staged sharp rallies after U.S. President Donald Trump said he was prepared to meet North Korea's Kim Jong Un, potentially marking a major breakthrough in nuclear tensions between the two countries.

Japan's Nikkei rose 0.5 percent and South Korean stocks gained more than 1 percent.

News that the United States is pressing ahead with tariffs on steel and aluminum imports did not seem to rattle investors as much as the initial proposals for them did last week.

"So far the tariffs are mainly symbolic, as imports of steel and aluminum only account for 2 percent of total imports of goods in the U.S. and it remains our base case that this is not going to evolve into a full-blown global trade war, as it would hurt everyone economically," strategists at Danske Bank wrote in a research note.

YEN DIVES

In currencies, the Japanese yen was the biggest mover, falling more than half a percent against the dollar to its lowest in over a week following the news on North Korea.

The drop followed the Bank of Japan's policy meeting, where it kept monetary policy unchanged and stuck to its upbeat view of the economy. The yen has gained 7 percent against the dollar since the start of the year on concerns that the outbreak of a trade war would derail a global growth recovery. [FRX/]

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"We are trying to find a bottom on dollar/yen and the other thing to watch for is when the typical year-end repatriation flows that are made by Japanese institutions for the fiscal year end abates, and that might push dollar/yen even higher," said Kenneth Broux, a currency strategist at Societe Generale (PA:SOGN).

The dollar index, which measures the greenback against a basket of currencies, was up 0.1 percent on the day.

The euro was down 0.1 percent.

Rising protectionism was a risk cited on Thursday by European Central Bank President Mario Draghi following the central bank's latest policy meeting.

While the ECB did drop its easing bias as some expected, Draghi sounded in no rush to start unwinding the bank's stimulus.

Crude oil futures rose. U.S. crude rose 1 percent to $60.71 per barrel, while Brent crude futures rose 1.2 percent to $64.36 per barrel.