Global markets guardedly optimistic over upcoming US jobs data

LONDON - Optimism over upcoming U.S. jobs figures helped stocks and the euro to rally on Friday despite further evidence that the 17-nation eurozone is heading for recession.

Following a run of fairly strong U.S. economic data, investors are increasingly confident that the world's largest economy is over a soft patch from last summer, helping to offset the global economic impact wrought by Europe's ongoing debt crisis.

Figures released Friday provided further evidence that the eurozone is heading for a recession. Eurostat, the EU's statistics office, said retail sales dropped 0.4 per cent during the month, in contrast to expectations for an increase of the same amount.

The December data reinforced expectations that the eurozone contracted during the fourth quarter of the year. Eurostat is due to publish its first estimate for the quarter on Feb. 15.

The highlight of the day in the markets will be the monthly U.S. nonfarm payrolls data. Expectations are that the U.S. economy generated around 150,000 jobs during January. Though that is unspectacular for an economy recovering from its worst recession since World War II, the amount of jobs being created is up from levels seen just a few months ago.

"Volatility is likely to remain low until these figures are out, with traders opting to sit and await news rather than heavily commit themselves," said David Jones, chief market strategist at IG Index.

In Europe, the FTSE 100 index of leading British shares was up 0.5 per cent at 5,823 while Germany's DAX rose 0.4 per cent to 6,682. The CAC-40 in France was 0.5 per cent higher at 3,394.

Wall Street was also poised for a solid opening, though how it actually performs will hinge on the payrolls data, which are released an hour before the bell. Dow futures and the S&P 500 futures were both up 0.2 per cent.

The euro was also garnering support alongside stocks — when appetite for risk is elevated, the euro often finds favour. It was trading 0.3 per cent higher at $1.3177 despite the retail sales disappointment.

The focus on the U.S. has proved a welcome diversion for some traders from monitoring the daily grind of Europe's debt crisis, where much hinges on whether Greece can secure a deal with its private creditors, as is anticipated. A deal is expected soon, though that has been the official line for a few weeks.

Earlier in Asia, the picture was mixed.

Japan's Nikkei 225 index fell 0.5 per cent to close at 8,831.93 but Hong Kong's Hang Seng ended marginally higher at 20,756.98.

Mainland Chinese shares extended gains fueled by news of fresh support for the farming and small-business sectors, with the benchmark Shanghai Composite Index rising 0.8 per cent to 2,330.41 while the Shenzhen Composite Index added 1.5 per cent to 878.29.

Oil markets were also relatively subdued. Benchmark oil for March delivery was up 40 cents to $96.76 per barrel in electronic trading on the New York Mercantile Exchange.

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Pamela Sampson in Bangkok contributed to this report.