Morning Bid: Seems payrolls isn't the data you are looking for

A look at the day ahead in European and global markets from Stella Qiu

U.S. Federal Reserve Governor Christopher Waller overnight urged markets to "give disinflation a chance" as global bond yields fly. And with that, markets are back to pricing this month's interest rate decision as a coin flip between whether the Fed stands pat or hikes for the first time in three years - options every central bank desires. Consider the job well done.

He then suggested the August non-farm payrolls report, due later in the global day, isn't the data you are looking for. Rather the August CPI report next week has the secrets.

Median forecasts are for an increase of 56,000 jobs, after a shock fall of 23,000 the previous month. Market participants tip the unemployment rate to hold at 4.1%, with a risk of 4.2%.

Asia was relieved enough to lift the Nikkei 1.1%, while South Korea's KOSPI rose 1.3% and Hong Kong's Hang Seng jumped 2.1%. Wall Street and European futures are practically flat as of writing.

Still, another fall in jobs could tip the balance to a rate pause this month, while a strong result would give the Fed cover to raise. That means CPI and PPI readings next week are the deciding variable - the stakes are so high some economists are even modelling PCE inflation down to three decimal points.

Short-end Treasuries rallied and the yield curve bull-steepened, as investors in long bonds would actually rather the Fed hike to head off inflation.

Oil prices held near six-week highs, with Brent crude futures up 7% this week at $95.52 a barrel.

The U.S. dollar's retreat added to a mysterious rally in the yen, which has gained 2.5% this week to 156 a dollar. Some suspect FX checks by Tokyo or even clandestine intervention, while rate-hike expectations for the Bank of Japan are also building.

A BOJ move this month is about 75% priced in, and there is a tightening of 30 basis points expected by October, raising the prospect of either a larger increase or a rare back-to-back move.

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Key developments that could influence markets on Friday:

• UK S&P Global PMIs

• Eurozone retail sales for July

• U.S. nonfarm payrolls data for August

(By Stella Qiu; Editing by Christopher Cushing)