London — World stocks clung to their 17-month highs on Friday and bonds paused after this week’s rally ahead of US jobs data, a gauge that could stoke or temper market expectations about aggressive policy easing by the US Federal Reserve.

Trade across global markets was expected to remain subdued following the Independence Day holiday in the US on Thursday and ahead of the non-farm payrolls report.

Though European bourses suffered with the pan-region Stoxx  600 slipping 0.3%, dragged lower by the basic resource and industrial goods and services sectors, which both fell more than 1.5%.

The losses came after German data showed industrial orders had fallen far more than expected in May, and a warning from the economy ministry that this sector of Europe’s largest economy was likely to remain weak in the coming months.

A sharp drop in China iron ore futures hit miners.

Tech shares retreated 0.9% after Samsung’s dour forecast showed the impact of US-China trade war on global chip and smartphone markets, sending Infineon, STMicroelectronics and Siltronic as much as 1.5% lower.

US futures pointed to a softer opening for Wall Street as well with E-Minis for the S&P500 at -0.1%.

“Devastating new orders data just undermined any hopes for an industrial rebound. We are starting to lose our optimism,” said Carsten Brzeski, chief economist at ING Germany. “Combined with the weakest June performance of the labour market since 2002 and disappointing retail sales, today’s new orders wrap up a week to forget for the German economy. The fear factor is back.”

The losses in Europe followed gains in Asia, where MSCI’s broadest index of Asia-Pacific shares excluding Japan was set for its fifth straight weekly rise. Japan’s Nikkei added 0.2%. Chinese shares were slightly higher with the blue-chip index up 0.5%.

World stocks and bonds have rallied since June on hopes that global central banks will keep policy easy to support growth. A ceasefire in the protracted China-US trade war has also bolstered sentiment.

All eyes are now on US non-farm payrolls, due later in the day, which are expected to have jumped by 160,000 in June compared with 75,000 in May.

“This will be the last employment report before the Federal open market committee meeting at the end of this month for which markets are pricing in 33 basis points of cuts as of this morning,” Deutsche Bank’s Craig Nicol wrote in a note to clients.

Fed futures are fully pricing in a 25-basis-point cut when the Fed meets on July 30-31. Investors also see a 25% chance of a 50-basis-point reduction.

Said Nicol: “What today’s report says about the trends in hiring and income growth could meaningfully impact market expectations so expect there to be just as much focus on hours and wages as the headline payrolls reading.”

Bond yields

The Fed would not be alone in embarking on easier monetary policy. Prospects of global easing have sent government bond yields to multi-year lows around the world.

US 10-year treasuries yields hit their lowest since November 2016 at 1.941%. Germany’s 10-year government bund yield, a benchmark for eurozone debt, fell to minus 0.4% and breached the European Central Bank’s (ECB) deposit rate for the first time — a level analysts say acts as a psychological barrier even though shorter-dated German bund yields trade well below it.

The easing bund yields dragged the euro 0.1% lower to $1.1273 with the common currency on track for the biggest weekly drop in three weeks. The dollar index was steady at 96.823, though, on track for a 0.8% gain this week. Against the yen, the dollar gained 0.2% to ¥108.04.

Worries about the health of the global economy also weighed on commodity markets. Oil prices eased with Brent crude futures, the international benchmark for oil prices, off 30c at $63.00 a barrel while US crude slipped 85c to $56.49.

Crude markets shrugging off tensions around Iran and a decision by oil cartel Opec and its allies to extend a supply cut deal until next year was an ominous sign to market watchers. “When bullish signals fail to lift the oil market’s spirits, we should be very concerned that this downtrend could run much further than expected,” said Stephen Innes, managing partner at Vanguard Markets.

China iron ore futures racked up sharp losses after hitting a record on Wednesday. China’s most-active September iron ore contract on the Dalian Commodity Exchange fell as much as 4.9% to 838 yuan ($121.89) a tonne.

Spot gold fell 0.1% to $1,413.76 an ounce.