LONDON: European and Asian stock markets fell Friday ahead of highly-anticipated US jobs data that could determine by how much the Federal Reserve will cut interest rates this month.
As a rollercoaster week drew to a close, debate centred on Fed plans for interest rates when it meets in less than a fortnight, with most observers expecting a 25-basis-point cut after inflation cooled.
However, analysts say it could go twice as big if Friday's non-farm payrolls report for August comes in well below forecasts, as a series of recent figures suggest the US economy is slowing more sharply than initially thought.
"Today's US jobs report appears to hold the keys to public perception over whether we are seeing the US economy falling into a recession," said Joshua Mahony, chief market analyst at Scope Markets.
US data Thursday showed a miss on private-sector hiring, which was slightly offset by a dip in first-time and continuing claims for jobless benefits.
A separate report pointed to a better-than-expected marginal increase in activity in the key services sector.
"There has been nothing in the latest batch of US economic data... to materially impact on expectations for (Friday's) all-important employment data or to move the dial on expectations for what the Fed is likely to do on September 18," said National Australia Bank's Ray Attrill.
Wall Street ended on a tepid note Thursday, while the dollar traded mixed against main rivals ahead of the jobs report.
Tokyo's stock market was weighed down Friday by a strong yen, which has picked up against the dollar on bets of a Fed rate-cut and growing expectations that the Bank of Japan would continue hiking its own borrowing costs.
Hong Kong's stock market shut Friday owing to a typhoon.
The broadly calm end to the week came after markets were sent tanking Wednesday, in part over worries about tech firms' huge valuations -- particularly chip giant Nvidia.
Analysts warned there was a lot of risk in Friday's jobs figures, with a sharp drop likely to boost bets on a 50-point cut but stoke fresh recession worries, while an above-forecast read would dent hopes for a series of cuts before next year.
Traders have factored in one percentage point's worth of reductions before the end of 2024.
"Concerns about economic weakness in the US have already led to two big shockwaves on the stock market in the past few months, and there is a potential for more tremors if the data looks bleak," said Russ Mould, investment director at AJ Bell.