Global stocks and bonds recuperated on Thursday, rallying ahead of the U.S. data and central banker comments that could reinforce investor expectations that the Federal Reserve (Fed) would raise rates later this month.
A recovery in global bonds helped improve sentiment in equities, while the yen powered towards its biggest two-day rally since a boost from official intervention early last month.
Oil reversed earlier losses to rise above $95 a barrel, as uncertainty prevailed over renewed military strikes between the U.S. and Iran.
In Europe, the STOXX 600 rose 0.2%, breaking three days of losses, while U.S. futures were up around 0.1%.
In premarket trading, shares in Broadcom fell around 2% after the company reported fourth-quarter revenue forecasts that fell short of expectations, while shares in Snowflake soared by over 20% after the cloud data platform provider delivered a stronger annual revenue forecast.
Investors' immediate focus is Friday's U.S. payrolls report after disappointing private labour data for August.
Fed Board Governor Christopher Waller is due to speak, after New York Fed President John Williams said on Wednesday rising long-term bond yields were a reflection of a solid economy rather than inflation fears, adding that he was still collecting information to drive his next monetary policy decision.
"There is an interpretation about why yields are moving higher – is it good, or bad?
I feel that the negative reasons are more often put forward than the positive reasons. Negative reasons being: too much supply of debt, fiscal risk, geopolitics and, normalization of risk premium because of oil. But it might be that a key reason behind higher yields is simply higher nominal growth," Lombard Odier chief economist Samy Chaar said.
"If demand is strong and it's demand that is keeping yields at high levels, it's quite a good environment for multi-asset portfolios, in the sense that you want to be exposed to profit growth with equities, and you want to be exposed to carry as well, with credit," he said.
Money markets currently assign a roughly 60% chance of a rate hike from the Fed this month, up from less than 40% a week ago.
Sovereign bond yields fell, having hit multi-year highs in the last week as concerns have deepened about tighter monetary policy and deteriorating fiscal conditions.
Benchmark U.S. 10-year yields were down 2 basis points at 4.77%, while 10-year German yields were also down 2 bps at 3.353%.
The dollar index, which tracks the U.S. currency against a basket of six others, fell 0.4%, largely as a function of the push higher in the yen.
Mounting expectations that the Bank of Japan will raise rates sooner rather than later have pushed the Japanese currency up by over 2.5% in the last two days to trade around 156.1, set for its biggest two-day rise since a round of historic U.S.-Japanese intervention in early August.
The euro gained 0.18% to trade around $1.1609, while the pound was up 0.1% at $1.349 and the Swiss franc strengthened to 0.8087 francs, leaving the dollar down 0.5%.
In commodities, the oil price fell for the first time in nearly a week, although investors remained on edge after the U.S. and Iran exchanged their largest barrage of attacks since July, reviving fears of a broader regional escalation in the Middle East.
Brent crude rose for a fourth day, up 1% at $96.62 a barrel. Gold rose 1.1% to $4,434 an ounce. It is now nearly 13% above June's seven-month lows, as geopolitical uncertainty and concern about the debasement of the U.S. dollar have lured investors back into the market.
The Dutch central bank on Wednesday said it had moved a large part of its gold reserves from North America to vaults in London over the past six months to be better prepared for a potential crisis.
