Morning bid: Super-sized Fed cut climbs back on the table

A look at the day ahead in European and global markets from Kevin Buckland

European traders who went to bed thinking a quarter-point Fed rate cut was a lock for next week may well have had a rude awakening on this Friday the 13th, with the odds for a super-sized half-point reduction back at nearly a coin toss.

It started with separate reports in the Financial Times and the Wall Street Journal that both said the Sept. 18 decision remained "a close call". Then former New York Fed President Bill Dudley, who remains highly influential, said at an event in Singapore that there's "a strong case" for a 50 bps reduction.

That put the dollar on the defensive, as it slipped back towards its lowest level this year against the yen and lost additional ground on the euro. Two-year Treasury yields were back below 3.6% in Asian hours.

Gold pushed to a new all-time peak at $2,570.

Reactions in the equities markets were mixed. Hong Kong's Hang Seng was up more than 1% and Australian stocks were also higher.

But for the Nikkei, a decline was pretty much a given with the yen that much stronger. South Korea also slumped and mainland Chinese stocks struggled. It's worth noting that all three of those markets are heading into a long holiday weekend, with South Korean traders not back at work until next Thursday.

A very early look at pan-European STOXX 50 futures was positive, pointing up 0.3%.

There's little on the data docket in Europe on Friday to distract from Fed-focused speculation, which has boosted the chance of a 50 bps cut to 43% versus 28% early in the Asian morning. Some CPI prints are continuing to roll in, including from France and Greece. Data is also due on the euro region's industrial production.

No central bank speeches are on the calendar, with the Fed and the Bank of England - which will announce policy next Thursday, with no change expected - in blackout periods. Meanwhile, the ECB has moved mostly into the rear-view mirror after Thursday's well-telegraphed rate cut, and no clear guidance from President Christine Lagarde on when to expect the next one.

Key developments that could influence markets on Friday:

-France, Greece, Poland, Slovakia CPI (August)

-Euro zone industrial production (July)

(By Kevin Buckland; Editing by Edmund Klamann)