Morning Bid: All eyes on the jobs market

(Reuters) – A look at the day ahead in U.S. and global markets by Harry Robertson

Data Jerome Powell wants, and data Jerome Powell shall get.

The Federal Reserve chair on Wednesday continued to play a familiar tune. “Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy,” he said in a speech at Stanford University.

Thursday brings new numbers on weekly jobless claims for Powell and his colleagues to chew on. Economists think the number will come in at 214,000, up slightly from the week before but in line with the average over the last six months – and hardly commensurate with a faltering labor market.

Then Friday brings the big one: March’s nonfarm payroll employment data could cause markets to lurch. Analysts polled by Reuters think 200,000 jobs were added in March, a relatively big drop from 275,000 in February. But recent U.S. data has tended to come in hotter than anticipated.

Wednesday did deliver a sign of a potential crack in the U.S. economy’s armour, however. The Institute for Supply Management’s gauge of the service sector came in much weaker than expected, with a measure of price growth hitting a four-year low.

The ISM reading dented the dollar, which ground lower and ended the session down 0.5%, although the 10-year Treasury yield remains lodged at around its highest since November.

In FX markets, where volatility has cratered, the focus remains on whether Japan will step in to prop up the yen, which is trading around its lowest in 34 years.

The S&P 500 rose slightly on Wednesday but stayed around 1% below last week’s record high after a wobbly start to the second quarter. Futures point to a slight gain when trading opens.

European stocks were up slightly on Thursday, while oil traded at a five-month high.

A divergence is finally starting to show in investors’ rate cut expectations, as Europe’s economy lags behind the U.S. Traders now see fewer than 70 basis points of cuts from the Fed by December, but expect nearly 90 from the European Central Bank.

Euro zone inflation dropped to 2.4% in March, data showed on Wednesday, lower than expected and tantalisingly close to the ECB’s 2% target. In Switzerland, inflation is running at just 1%, figures showed on Thursday.

U.S. March consumer price inflation data is due next week, with inflation at 3.2% in February.

Five Fed officials, including Philly’s Patrick Harker and Cleveland’s Loretta Mester, are due to speak on Thursday, after Atlanta’s Raphael Bostic suggested a rate cut might not come until the fourth quarter on Wednesday.

Key developments that should provide more direction to U.S. markets later on Thursday:

* U.S. initial weekly jobless claims data

* U.S. trade balance data

* ECB minutes from March 7 meeting

* Fed speakers: Harker, Barkin, Goolsbee, Kashkari, Mester

(Reporting by Harry Robertson; Editing by Christina Fincher)

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