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

Ankur Banerjee

Markets hit the pause button after a selloff in equities

since the start of the week but sentiment remained fragile, as

worries re-emerged over the prospects for the U.S. economy and

investors focused squarely on this week's job reports.

Labour data on Wednesday suggested the U.S. jobs market

was losing steam, raising expectations the Federal Reserve may

resort to large interest rate cuts, while additional reports

including Friday's non-farm payrolls data are keeping sentiment

on edge.

Futures indicated European bourses were set for a subdued

open after Asian shares rose 0.4% on Thursday, clawing back some

of the week's losses, although the MSCI's broadest index of

Asia-Pacific shares outside Japan is still down

2.2% so far this week.

Risk sentiment remained frail, with the yen

holding on to its gains for the week as traders seek safe assets

while the dollar was steady in Asian hours after weakness

overnight.

Hawkish rhetoric from the Bank of Japan also supported the

yen after BOJ board member Hajime Takata hinted the central bank

should stay on course to raise interest rates.

While the spotlight this week will be on Friday's U.S.

non-farm payrolls report, in the meantime Thursday's U.S.

jobless claims reading and euro zone retail sales data will keep

investors busy.

The markets are keen for clues on whether data will dictate

that the Fed cut interest rates by 25 basis points (bps) or 50

bps when it meets later this month. Traders added to wagers of a

50 bps cut following the job openings data and are now pricing

in a 44% chance, up from 38% a day earlier.

Investors are also pricing in 110 bps of cuts from the

remaining three Fed meetings this year, and when you factor in

the Fed's focus on the labour market, it looks like economic

data in the next few weeks will be put under the microscope by

increasingly skittish investors.

Key developments that could influence markets on Thursday:

Economic events: Euro zone August retail sales; August

construction PMI data for Germany, France and euro zone