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

Wee

European stocks are in for a rocky start on Friday with

futures pointing to the sharpest daily percentage fall in

months, rattled by escalating tensions in the Middle East.

Israeli Prime Minister Benjamin Netanyahu's comments that

the country would harm "whoever harms us or plans to harm us"

stoked fears of a wider war. Israel is bracing for the

possibility of a retaliatory attack for Monday's presumed

Israeli air strike on Iran's embassy.

That took the shine off Wall Street's stellar run in a late

fall on Thursday, which left Asian shares a sea of red and sent

oil prices jumping.

Europe's unlikely to be spared too, with the EURO STOXX 50

index futures already down more than 1.5% - a large

move for Asian time.

Britain's FTSE futures likewise fell more than 1.4%.

The risk of a prolonged Israel-Hamas war - once overshadowed

by the global rate cut cheer - has come back to the fore. That's

proving to be a wild card for central bankers just as markets

reassess their expectations of Federal Reserve rate cuts this

year.

Minneapolis Fed President Neel Kashkari, a known hawk, went

as far as to say that rate cuts may not even be needed at all

this year if the progress on inflation continues to stall.

Brent futures above $90 a barrel probably aren't

helping the case for easing either.

All this comes ahead of a key U.S. jobs report due later on

Friday that could make or break the case for a first Fed rate

cut in June, which seems to have turned into a cat-and-mouse

game.

Surprise growth in U.S. manufacturing at the start of the

week helped propel the dollar to an over four-month high as

traders pared bets of an imminent Fed easing cycle, only to

backtrack after a downbeat U.S. services sector survey released

days later.

Expectations for Friday's data are for nonfarm payrolls to

have increased 200,000 jobs in March, along with tentative signs

that labour market conditions in the world's largest economy are

easing, albeit at a moderate pace.

Key developments that could influence markets on Friday:

- Euro zone retail sales (February)

- Germany import prices (February)

- Reopening of 1-month, 3-month and 6-month UK government

debt auctions

- U.S. nonfarm payrolls (March)

(Editing by Sam Holmes.)