Stocks higher, dollar to extend losing streak, as markets weigh rate cuts

By Chibuike Oguh and Amanda Cooper

NEW YORK/LONDON, Dec 4 (Reuters) - Global shares edged up on Thursday, powered by expectations that a U.S. rate cut will support the world's largest economy after data showed employment is slowing, while the dollar was lower and poised for its 10th straight day of losses against a basket of major currencies.

U.S. stocks were losing ground in early trade after two consecutive sessions of gains, with the benchmark S&P 500 flat. Healthcare, consumer discretionary and materials stocks were suffering the most losses, while real estate, financials and utilities were advancing. 

The Dow Jones Industrial Average fell 0.09%, the S&P 500 edged down 0.06% and the Nasdaq Composite lost 0.14%. 

In Europe, the STOXX 600 was up 0.42% and still headed for a modest weekly gain. London's FTSE 100 index was up 0.16% while Germany's DAX gained 0.45%. MSCI's gauge of stocks across the globe rose 0.18%.

Japanese stocks rallied sharply after an auction of government bonds drew strong demand from investors, which helped set the tone for the broader equity market. The Nikkei rose 2.33%.

"After a 5% pullback in late November, stocks have rebounded and are now trading at the pre-pullback levels and near all-time highs," Michael Farr, chief executive of investment advisory firm Farr, Miller & Washington in Washington.

US PRIVATE PAYROLLS DATA POST BIG DROP

The gains came after U.S. private payrolls data posted their biggest drop in more than two-and-a-half years, and following a survey of the services sector that showed activity held steady in November while hiring slowed.

"If they cut rates by a quarter of a point and then take a pause - which every Fed speaker has indicated, markets might be disappointed in the messaging. If they don't cut and say we're going to wait until the next meeting, markets will be disappointed there too," Farr said.

Fed funds futures are pricing a near 90% chance of a quarter-point cut at the end of the Fed's next meeting on December 10, compared with an 83.4% chance a week ago, according to the CME Group's FedWatch tool.      

The dollar index <=US

D>, which tracks the U.S. currency's performance against six others, was last down 0.08% on the day, heading for a 10th straight daily decline, making this its longest stretch of losses since at least 1971, according to LSEG data.

US 10-YEAR TREASURY BOND YIELD UP 3.4 BASIS POINTS

The yield on the U.S. 10-year Treasury bond was last up 3.4 basis points at 4.092%. The Financial Times reported on Wednesday that bond investors had expressed concerns to the U.S. Treasury that Kevin Hassett, a candidate to replace Jerome Powell as Fed chair next year, could aggressively cut interest rates to align with President Donald Trump's preferences.

"I think there's purposeful timing by the Trump administration to announce the president's selection of a new Fed chairman that will be seen - correctly or not - as being more dovish around this meeting to appear as an antidote to the messaging," Farr said.

In Japan, the government's debt sale drew the strongest demand in more than six years, which helped soothe investor nerves about the country's long-term finances that have stoked similar worries about other economies.

The dollar was last down 0.28% at 154.8 against the yen, which is heading for its largest weekly gain against the U.S. currency in over two months.

The yen got another boost from a Reuters report that the Bank of Japan (BOJ) is likely to raise interest rates in December with the government expected to tolerate such a decision, citing three government sources familiar with the deliberations.

Meanwhile, the yuan softened a touch, leaving the dollar up 0.18% at 7.070 yuan in offshore trading in Hong Kong. The Chinese currency hit its strongest level against the dollar in more than a year on Wednesday.

Precious metals cooled after a recent hot streak. Gold was last down 0.28% at $4,195 an ounce, while silver fell 2.4% to $57.03 an ounce, after hitting a record high of $58.98 on Tuesday.

Brent crude was last up 0.06% at $62.71 a barrel.

(Reporting by Chibuike Oguh in New York and Gregor Stuart Hunter; Editing by Lincoln Feast, Sonali Paul, Andrew Heavens, Chizu Nomiyama and Ed Osmond)