GLOBAL MARKETS - Stocks hit record highs ahead of U.S. payrolls data

LONDON: Global shares hit record highs on Friday, as investors bet on transatlantic interest rate cuts starting within months and hoped that U.S. payroll numbers before the opening bell on Wall Street point to continued resilience, but not overheating, in the U.S. economy. The U.S. Federal Reserve and the European Central Bank this week left markets expecting rate cuts beginning in the summer, putting downward pressure on U.S. government bond yields .

The dollar headed for its sharpest weekly drop of the year on the growing likelihood of lower borrowing costs later in the year, while the yen gained on mounting speculation of a rate rise in Japan. Crude oil prices rose on signs of growing demand in the United States and China, while gold hit a record high, enjoying its best week in five months.

The MSCI All-Country stock index was up 0.2%, near its record high of 774.66 points from earlier in the session. A year ago, investors were staring down the barrel of a U.S. banking crisis and worries about credit, but since then tech stocks have pushed stock indexes to record highs on the back of an AI boom, said Patrick Spencer, RW Baird vice chair of equities.

"Now you have this Catch-22 at the moment, whereas you've got some very strong macro conditions, disinflation, the approaching monetary pivot, resilient earnings growth, and AI enthusiasm," Spencer said. "Countering that you have unappealing technical developments where you've got some euphoric sentiment and frothy prices in tech, but I suspect as interest rates come down, the breadth of the market will widen," Spencer said.

In Europe, the STOXX index of 600 companies was up 0.15% at 503.92, a record high. ECB policymaker Francois Villeroy de Galhau said there would be a rate cut in the spring, which he defined as from April until June 21, the date of the central bank's meeting that month.

German bund yields were on track to record their biggest weekly fall since mid-December on raised bets of an ECB cut in rates. ING said there were also signs that the German economy, Europe's biggest, was bottoming out, though with no imminent rebound in sight.

U.S. PAYROLLS BREATHER? The U.S. Labor Department's closely watched jobs data at 1330 GMT is likely to show that growth in the jobs market slowed in February after two straight months of robust gains, though it probably remains too strong for the Fed to consider a June rate cut that financial markets now anticipate, economists said.

Non-farm payrolls likely increased by 200,000 jobs last month after surging 353,000 in January, according to a Reuters survey of economists. After the payrolls, attention will immediately turn to next Tuesday's U.S. inflation report.

S&P 500 futures and Nasdaq futures were firmer. In Asia, expectations mounted that the Bank of Japan (BOJ) could finally exit negative interest rates this month.

That lit a fire under the yen, lifting it to a one-month high against the dollar, and pushed domestic bond yields higher as well.

The Nikkei closed up 0.23%.

Elsewhere in Asia, Chinese blue chips rose 0.4% and the Shanghai Composite Index gained 0.6%. Both indexes, however, were set to end the week with marginal gains. Hong Kong's Hang Seng Index rose 0.7%.

Data on Thursday showed China's export and import growth in the January-February period beat forecasts, though that did little to turn battered sentiment around, as investors were left underwhelmed by the lack of details for strong stimulus from Beijing to shore up the country's economic recovery at this week's annual parliament session.

Hopes of rate cuts put downward pressure on U.S. government bond yields, with the two-year U.S. Treasury yield, which typically reflects near-term rate expectations, easing to 4.4944%.

The benchmark 10-year yield was last trading at 4.0749%.

The dollar eased to a roughly two-month low on the euro, with the single currency last at $1.0934, after peaking at $1.0956 earlier in the session. In commodity markets, Brent rose 0.9% to $83.75 a barrel, while U.S. crude gained 1% to $79.87 per barrel.

Spot gold edged 0.3% higher to $2,165 an ounce.