Marketmind: China surprise lifts mood before US payrolls

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Employees work at a factory in Zunyi

Employees work on the production line of glass panels for mobile phones at a factory in Zunyi, Guizhou province, China March 6, 2023. cnsphoto via REUTERS/File Photo Acquire Licensing Rights

A look at the day ahead in European and global markets from Brigid Riley

It's Friday - and the start of a new month - and much-anticipated U.S. nonfarm payrolls finally drop along with a barrage of manufacturing data, to close out a week of mixed economic reports that included an upside surprise from China.

With the U.S. labour market still tight, the Federal Reserve is looking for more indications of cooling, although not too cool as the central bank tries to achieve a soft landing.

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Markets have priced in only a one-in-ten chance of a rate hike at the Fed's next meeting in September, but remain uncertain about the rest of the year.

Fed officials haven't been making the prognosticators' job any easier with their increasingly varied comments, although a couple are lined up to speak again on Friday and could offer fresh clues on the mood inside the U.S. central bank.

Meanwhile, a pleasant surprise emerged from China, where a private-sector survey showed factory activity in the world's second-largest economy ticked back into expansive territory.

It's a little too early to celebrate a major shift in recent trends, though, with the property sector and weak household consumption still weighing heavily.

China's economic troubles prompted three of the country's largest banks to cut interest rates on Friday across a range of deposits in an effort to ease some of the pressure on their margins.

China's stock market shook off its recent gloom in the Asian morning, with the blue-chip index's (.CSI300) real estate (.CSI000) and financial (.CSIFN) sub-indexes leading the charge.

The parade of PMI data marches on, with surveys due from a host of countries in the euro bloc on Friday.

The euro zone final PMI will be in focus after the survey last month showed manufacturing activity slowing at the fastest pace since the start of the pandemic.

This month's data looks likely to add additional fuel to the will-they-won't-they debate raging over the rate outlook in Europe, with European Central Bank members warning markets on Thursday that the possibility remains for more rate hikes.

Key developments that could influence markets on Friday:

-U.S. August non-farm payrolls and unemployment rate

-Spain July international tourist arrivals

-August final PMIs for euro zone, Spain, Switzerland, Italy, France, Germany, Sweden, UK, U.S.

-Italy final Q2 GDP and July producer prices

-Fed's Bostic and Mester to speak at separate events

Reporting by Brigid Riley

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