Shares set to end week back in black; caution ahead of payrolls

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 0.1 per cent higher and set for a weekly gain of almost 2 per cent.

Gains came largely from stocks in Asia, which staged sharp rallies after US 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.

“While it is easy to be cynical, one can't help feeling these talks could well go the same way as previous attempts. But nonetheless it will be interesting to see how this one plays out,” said Michael Hewson, chief markets analyst at CMC Markets.

Trump’s aides have been wary of North Korea’s diplomatic overtures because of its history of reneging on international commitments and the failure of efforts on disarmament by previous U.S. administrations.

Japan's Nikkei rose 0.5 per cent and South Korean stocks rose more than 1 per cent. The dollar also rose against the safe-haven Japanese yen, which fell to its lowest in over a week.

The US pressing ahead with tariffs on steel and aluminium imports on Thursday did not seem to rattle investors as much as proposals for them did last week, but caution over the release of US jobs data later in the day was palpable in Europe, where shares opened slightly lower.

Upbeat jobs data last month fanned speculation about faster interest rate rises in the United States, causing a rout in the bond market and hammering world equities. The US payrolls report is due at 1330 GMT.

The pan-European STOXX 600 was down 0.1 per cent by 0815 GMT, with most sectors in the red except for defensive industries such as healthcare or utilities, which made limited gains. Germany’s DAX was down half a per cent and France’s CAC 40 was down 0.2 per cent. Britain’s FTSE 100 was up 0.1 per cent.

Falling yen

In currencies, the Japanese yen was the biggest mover, falling half a per cent 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 per cent against the dollar since the start of the year on concerns that the outbreak of a trade war would derail a global growth recovery.

“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.

The dollar index, which measures the greenback against a basket of currencies was down 0.1 per cent on the day. The euro was flat.

Rising protectionism was a risk cited overnight 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 stimulus.

Crude oil futures rose. US crude rose 0.4 per cent to $60.38 per barrel, while Brent crude futures rose half 0.6 per cent to $64.01 per barrel. Spot gold eased 0.2 per cent to $1,319.16 per ounce, extending losses into a third session as demand for safe havens lessened.

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