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

Stella Qiu

Most stocks in Asia are down on Friday, following the lead

of Wall Street futures, ahead of the all-important payrolls

report, which could push Treasury yields and the U.S. dollar

even higher.

Both Nasdaq futures and S&P 500 futures were

down 0.3%, after U.S. trading was closed overnight to mark the

funeral of former President Jimmy Carter. European stock markets

look set for a flat open.

That likely reflects the angst in global bond markets. The

benchmark 10-year Treasury yield is just off an

eight-month peak of 4.73% and threatening a major chart level at

4.739%. The 30-year yield climbed 11 basis points

this week to the highest in over a year.

British government bond yields shot to the highest since

2008 as investors weighed the country's fiscal outlook, though

they have calmed somewhat for the moment.

Even China's bond yields rose on Friday, after the country's

central bank said it will suspend treasury bond purchases

temporarily. The reason offered was a shortage of paper, but

analysts suspected it was aimed at propping up the yuan.

Much is now riding on the payrolls report, where median

forecasts favour a rise of 160,000 in jobs in December with the

unemployment rate holding at 4.2%.

Forecasts lie in a relatively tight range of 120,000 to

200,000, suggesting more scope for an outside surprise. There's

an added wrinkle from the annual reanalysis of the household

survey, which could see the unemployment rate revised down for

recent months.

A surprisingly strong report will most likely drive 10-year

yields past 4.739%, with bears hungering for the psychologically

important level of 5%, highs not seen since 2007.

That would boost the already mighty U.S. dollar, which is

poised near two-year highs and wreaking havoc in emerging

markets.

The reaction in the stock market could be negative too, with

high valuations now being challenged by a rising term premium

and higher discount rates.

So investors may be better off praying for a soft report,

but not so soft that it endangers the goldilocks scenario for

the U.S. economy.

Then again, it would likely need to be an extremely weak

report to shift the dial on Fed rate cuts, given investors and

the Fed are now more focused on how Trump's policies might

unfold over the next few months.

Markets are already back to just 43 basis points of easing

this year, equivalent to fewer than two rate cuts, with the

first of those not fully priced in until June when the potential

impact of Trump's proposals becomes clearer.

In the foreign exchange market, the dollar is enjoying the

sixth straight week of gains. The British pound is an

underperformer, down 1% to $1.2303, the lowest in over a year.

Overnight, a slew of Fed officials came out and agreed there

is no rush to cut interest rates.

Key developments that could influence markets on Friday:

-- France industrial output for November

-- U.S. nonfarm payrolls report for December

(Editing by Sam Holmes)