Dollar, shares fall before U.S. jobs data

Wed Jun 5, 2013 7:55am EDT
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By Richard Hubbard

LONDON (Reuters) - The dollar sank below 100 yen on Wednesday and world shares fell, as investors pulled out of riskier assets before U.S. jobs data that might fuel talk of an early end to the Federal Reserve's stimulus program.

Private sector jobs growth for May, due at 8:15 a.m. EDT, is being watched for signs of strength, which would increase expectations of an early tapering in Fed bond buying for a market already on edge over Friday's nonfarm payrolls report.

MSCI's world equity index .MIWD00000PUS extended losses posted earlier on disappointment over an update from Japan on its growth program, and U.S. stocks futures dipped further into the red to point to a weak open on Wall Street. .N

The U.S. central bank has explicitly linked the health of the jobs market to the continuation of its ultra-loose monetary policy, which has come under review as economic data pointed to growing economic momentum despite government spending cuts.

"The Fed is definitely moving toward a tapering of its QE (quantitative easing) but there is uncertainty whether this could be as soon as September or by the end of the year," Lee Hardman, currency analyst for Bank of Tokyo Mitsubishi UFJ said.

Japan's main Nikkei share index .N225 earlier led equity market falls, dropping 3.8 percent to a two-month low in reaction to Prime Minister Shinzo Abe's latest policy announcement, which also sent the dollar down 0.4 percent against the Japanese currency to around 99.60 yen.

In the third tranche of measures aimed at boosting growth, Abe pledged to boost incomes and attract foreign businesses, but did not mention plans to encourage Japan's public funds to seek higher returns by investing more in riskier assets like equities.

"Investor expectations were for more specific growth policies and the disappointment has only exacerbated a trend for a correction in Japan's stock market," Hardman said.   Continued...

A man walks through the lobby of the London Stock Exchange August 5, 2011. REUTERS/Suzanne Plunkett