* Sterling plummets 10 percent, then bounces
* Traders cite "hard" Brexit worries but see no clear
* Stocks edge lower before U.S. non-farm payrolls data
* Disorderly reaction to U.S. rate hike may lead to outflows
* Treasury yields consolidate after recent rise
By Vikram Subhedar
LONDON, Oct 7 Sterling recouped some losses
after plunging almost 10 percent on Friday, as growing fears of
a "hard" exit by Britain from the European Union sent a shiver
through world stocks markets before U.S. jobs data.
The pound had slumped as much as 10 percent in Asia as it
crashed through key support levels, triggering a wave of
selling. It recovered in European trading but was still down 2.7
percent at $1.2271.
The impact of sterling's slide on other asset classes was
relatively muted, though caution prevailed. U.S. stock futures
were down 0.3 percent before U.S. payrolls data, which
could put pressure on the Federal Reserve to raise interest
European stocks fell 1 percent, dragged down by airlines and
other consumer-related sectors.
The STOXX 600 has fallen by around 7 percent since the start
of 2016, with investors pulling funds from European equities for
35 straight weeks, the longest streak on record, according to
Bank of America Merrill Lynch.
The plunge in the pound, which is poised to fall about 5
percent for the week, lifted London's FTSE as investors
bought shares of dividend-paying exporters such as oil majors
and mining companies. The UK benchmark is less than 1 percent
from record highs.
The pound has come under renewed pressure as expectations
grow that Britain's divorce from the EU will be messier and
costlier for the economy than expected. British Prime Minister
Theresa May on Sunday set a March deadline for beginning the
formal departure process from the EU.
"This move has shaken things in sterling and a huge amount
of any outstanding positioning will have been washed out and we
may be starting from a new, even more nervous footing," Citi
trader Sam Underwood wrote in a note to clients.
Sterling's slide spurred another round of bearish forecasts
on the currency.
HSBC said on Friday it forecast the pound would drop to
$1.10 and parity against the euro by the end of 2017. Morgan
Stanley said it expected the currency to retest the session's
lows of $1.20 in coming weeks.
"The pound used to be a relatively simple currency that used
to trade on cyclical events and data, but now it has become a
political and structural currency. This is a recipe for weakness
given its twin (budget and current account) deficits," said
David Bloom, global head of FX research at HSBC.
POUND ROLL TO PAYROLLS
Focus for market participants in other assets shifts to the
U.S. monthly jobs report later in the day. If job creation is
robust, it may cement the case for a U.S. rate increase in
Economists polled by Reuters forecast U.S. non-farm payrolls
to increase by 175,000.
A disorderly reaction to possible U.S. interest rate hikes
could disrupt capital flows and heighten asset price volatility
in Asia, the International Monetary Fund said on Thursday
Elsewhere in currency markets, the dollar edged down 0.1
percent against the yen to 103.80 after hitting its
highest level in a month on Thursday.
The euro eased 0.3 percent to $1.1120, poised to shed
1 percent for the week.
The dollar held firm after data on Thursday showed the
number of Americans filing for unemployment benefits
unexpectedly fell last week to near a 43-year low, boding well
for Friday's data.
Interest rate futures are now pricing in about a 65 percent
chance of a rate hike by December, compared with less than 50
percent late last month.
The 10-year U.S. Treasuries yield rose to a three-week high
of 1.746 percent on Thursday before easing slightly
to 1.73 percent on Friday.
Gold dropped to $1,252 per ounce, its lowest in three
and a half months, after declining 5 percent on the week. It
last stood at $1,258.8.
Silver has slumped more than 10 percent so far this
week to a four-month low of $17.1525 per ounce.
Oil prices steadied after U.S. crude broke through $50 a
barrel overnight, spurred by an informal meeting among the
world's biggest producers on output cuts and falling U.S. crude
U.S. crude futures gave up earlier gains and were
down 0.4 percent at $50.47, just below Thursday's four-month
high of $50.63. Brent fell 0.6 percent but is close to
its highest levels this year.
(Reporting by Vikram Subhedar and Marc Jones; Editing by Larry