NEW YORK - Equity markets fell and the dollar held gains as the optimism that coursed through trading floors earlier this week gave way to nervousness ahead of a massive US jobs report later Friday that could determine Federal Reserve rate hike plans.
Soft economic data out of Washington sent equities surging at the start of the week and dragged the greenback on hopes that the readings could allow the US central bank to slow its strict monetary tightening programme.
However, the uncertainty that has characterised the year so far has slowly returned and Wall Street's three main indexes ended Thursday with fresh losses, with sights firmly on the non-farm payrolls (NFP) figures.
Analysts expect the monthly report to show 250,000 posts were created in September, which would be the weakest since late 2020 but still a healthy figure suggesting a strong labour market.
There is a fear that a result higher than expectations could spark another sell-off across risk markets as investors bet on more bumper rate hikes.
Fed officials have consistently warned that they are determined to ramp up borrowing costs to fight four-decade-high inflation, even at the expense of a recession -- feeding worries among traders that the world economy is heading for such a scenario.
"The pivot party gang dialled down their new-found enthusiasm overnight after hawkish central bankers expressed concerns over sticky inflation," said SPI Asset Management's Stephen Innes.
He pointed out that other central banks, including in Europe and Canada, had also flagged further tough measures.
Still, OANDA's Edward Moya added that a consumer price index report next week was also on traders' radars.
"Economists are not expecting a significant drop in pricing pressures, but many traders think that a cool report could happen and that will force the Fed to change their tune next week," he said in a note.
"Fed messaging has been consistent and it will likely stay that way post-NFP. Rate hike and cut bets will likely have significant swings after next Thursday's inflation report."
Asian markets extended the New York retreat, with downbeat earnings from chipmakers -- and a warning from South Korean titan Samsung -- owing to a drop in demand that raised worries about the upcoming corporate reporting season.
Hong Kong led the losses in Asia after surging almost six percent Wednesday, while Tokyo, Sydney, Seoul, Wellington, Taipei, Mumbai, Bangkok and Jakarta were all in negative territory.
London, Paris and Frankfurt dipped and US futures were also in the red.