Shares and oil stabilise as September storms relent

By Marc Jones

LONDON (Reuters) - World share and oil prices stabilised on Thursday after savage starts to September, while the yen climbed to a one-month high and government bond markets rallied, as investors stuck with rate cut trades.

The storms, which have wiped off more than $2 trillion from global stock markets and battered commodities, eased just enough to mean Europe's main bourses were able to hold their ground early on after losing nearly 2% in recent days.

German industrial orders data came in stronger than expected, euro zone retail sales figures were in line with forecasts, and a flurry of key U.S. data was due both later and on Friday in the form of non-farm payrolls.

Bets that the U.S. Federal Reserve might now start its long-awaited rate cutting cycle with a bumper half point move this month kept the dollar on the defensive.

The Japanese yen, which has surged nearly 2% this week, remained the biggest beneficiary. It hit a one-month high of 143.20 per dollar overnight before shuffling back to 143.43 in European trading.

In debt markets, euro zone bond yields fell for a third straight session and U.S. Treasury yields were at 3.767% as investors continued to worry about the health of key global economies.

Data on Wednesday showed U.S. job openings fell to their lowest level in 3-1/2 years in July. Markets are now pricing in a 44% chance of a 50 basis points (bps) Fed cut at the bank's Sept. 17-18 meeting and 110 bps of easing by year-end.

"The market is jittery," Jefferies analyst Mohit Kumar said. But "we are keeping our modest long in risky assets despite recent moves. We do not see the (U.S.) economy slowing down as much as feared."

CHALLENGING

China's economy is still spluttering badly too, despite stimulus efforts, including for its long-troubled property market.

Wednesday saw heavyweight investment bank JPMorgan throw in the towel on its long-held bullish call on Chinese stocks, although the reaction from the country's bluechips on Thursday was a modest rise.

Commodities traders were also licking their wounds. Oil clawed back above $73 a barrel having slumped over 7% since the start of September. Bellwether metal copper inched above $9,000 a ton having plunged almost 20% since May.

"September has historically been a challenging month for risk assets," said Daniel Tan, a Singapore-based portfolio manager at Grasshopper Asset Management.

Wall Street stock futures were also pointing to a fairly steady open later. Investors' focus will be on how 'Magnificent Seven' darling Nvidia fares after its recent beating and the day's services sector and jobless claims data.

San Francisco Fed President Mary Daly said on Wednesday that the Fed now needed to cut interest rates to keep the labour market healthy and that incoming economic data will determine by how much.