London - Financial markets were in a state of suspended animation on Friday as tension mounted ahead of jobs data that could make or break the case for an imminent scaling back in US stimulus.
The to-and-fro of when the Federal Reserve will begin to halt the flow of cheap dollars has dominated trading worldwide for months and the main US jobs indicator - non-farm payrolls, due at 15:30 SA time - may yet tip the balance again.
A bunch of top US data has already come in strongly this week triggering a hefty sell-off in global stock and bond markets that had in most cases been at multi-year highs.
European bourses made a cautious recovery in early trade, but the week's turbulence, amplified by the diverging fortunes of the region's top economies, left the FTSEurofirst 300 index heading for its worst week in six months.
Government borrowing costs from Japan to Germany also hovered around fresh highs on trepidation the Fed could start tapering its $85 billion of monthly debt purchases at its policy meeting on December 17 and 18.
The median forecast is for an increase of 180,000 in US payrolls with the jobless rate steady at 7.2 percent.
The market would tend to see anything over 200,000 as greatly adding to the chances of a start to tapering this month, while a result under 150,000 would diminish the risk.
“A very strong payroll would give greater confidence that the US has weathered the recent government shut down well,” said Luke Bartholomew, investment analyst at Aberdeen Asset Management.
It would “increase speculation that tapering could still be on the cards for December.
So, perversely, a strong number could be damaging for stocks and other risk assets.”
For the moment, however, European shares were on track to snap a four-day run of falls as London's FTSE, Paris's CAC 40 and Frankfurt's Dax all gained 0.4 to 0.6 percent.
The Bundesbank gave German stocks a boost by raising its growth forecasts for the euro zone's largest economy for this year and next.
Japan's Nikkei had also managed to steady after steep falls in the previous two days.
It closed up 0.8 percent, outperforming the rest of Asia.
Shanghai stocks also stood out, slipping 0.5 percent after China set its yuan at a record high, continuing its slow appreciation.
The dollar had started to pull away from a five-week low as European trading gathered pace, while the euro took a breather ahead of the US jobs data after hitting a five-week high on Thursday.
Traders had snapped up the euro zone's shared currency after the bloc's central bank, the ECB, appeared in no rush at its last meeting of the year to take any further action to support the bloc's still-fragmented economy.
Draghi's playing down of the need for another long-term liquidity operation (LTRO) disappointed dealers who had been hoping for just such an operation to ease a liquidity squeeze over year end.
The single currency steadied at $1.3655 having finally cracked tough resistance at $1.3620.
The next chart target was $1.3705/18, which would not be too distant from the 2013 top of $1.3832.
The upward move has been in tandem with a widespread rise in government bond yields.
German 10-year yields were on track for their biggest one-week rise since mid-August as they hovered at 1.84 percent ahead of the US data.
In commodity markets, spot gold held at $1,224 an ounce, heading for a loss for the week of 2 percent.
US crude was flat at $97.38, cementing gains of 5 percent for the week so far thanks to a drop in US crude stocks.
Brent crude added 40 cents as it hovered just below $111 a barrel. - Reuters