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Markets make a big bet on Goldilocks' payroll number

Kevin Buckland gives us a look at what the future holds for European and global markets.

The markets are in a positive mood as they anticipate that the Fed will continue to reduce rates by this month, and again at year's end.

The previous month's payrolls shockingly high reading sparked speculation that the U.S. would have to change its monetary policy quickly. This time, economists expect a slightly higher reading.

Fed Chair Jay Powell shocked many last month at the closely watched Jackson Hole Symposium with a keynote suggesting a reduction on September 17, unless data get in the way.

Fedspeak has generally been dovish. The window for further comments will close later today, as the central banks enters its blackout period leading up to the policy meeting.

The U.S. Stock Futures are heading higher after the S&P 500 closed at a record high overnight and the Nasdaq Composite was just 6 points away from doing the same.

European futures are also rising, while Asian markets are rising by about 1%.

The bond markets, too, that had become so volatile at first of the week, were calmed down by the recent soft U.S. employment data. This has bolstered the confidence in a non-farm payrolls that will continue the narrative of easier Fed policy.

The yields of Japanese 30-year government bonds have fallen by about half after reaching record highs Wednesday. U.S. Treasury yields of similar maturity have fallen to three-week-lows. Two-year and 10-year yields are at four-month lows.

The yields on British 30-year gilts have returned to their levels of a week earlier, before the spike that lasted four days and reached the highest level since 1998. German and French yields have fallen from their multi-year highs.

Gold is also waiting its turn, hovering just below the all-time high of Wednesday after a seven-day rally that was breathless.

It's clear that a positive reading on U.S. payrolls is crucial. There's little to distract us from the main event, which is the release of German factory data, British sales, and the revised GDP for the euro area.

The following are key developments that may influence the markets on Friday.

Payrolls in the United States

-Canada payrolls

Euro zone GDP revised

German industrial orders and manufacturing output

Halifax house prices, UK retail sales

(source: Reuters)