Friday's US jobs report could trigger 'explosive' volatility in markets, analysts say. Here's why they're bracing for some big price swings..

Traders and investors braced for the jobs data on Friday.

Friday’s May US jobs report is a major moment for markets that could trigger “explosive” volatility after a quiet week, analysts have said.

On average, economists have predicted that nonfarm payrolls rose by 647,000 in May from 266,000 in April. Optimism has risen after Thursday’s unofficial ADP payrolls report smashed expectations.

But estimates vary significantly: the highest guess is 1 million and the lowest is 355,000, according to Bloomberg data.

“The pending monthly payrolls data is certainly a high-risk event that could trigger explosive levels of volatility,” Lukman Otunuga, senior research analyst at trading platform FXTM, said.

Counterintuitively, a weaker-than-expected May payrolls number on Friday could cause a rise in stocks. After the disappointing April figures were released in early May, the Nasdaq index jumped 1% as investors bet that the Federal Reserve would have to keep up support for the economy longer than expected.

Chris Scicluna, head of research at Daiwa Capital Markets, said: “Another big downside to payrolls would simply underscore the Fed’s need to be patient while the labor market tries to catch up with the improvement in demand.”

Otunuga said a strong report could push the dollar higher, but put pressure on stock markets by spurring speculation the Fed may have to cut back its support.

Analysts at TD Securities said in a note a strong figure would likely push up bond yields, as investors factor in a higher chance that the Fed will raise rates sooner than previously thought.

April’s hugely disappointing figure was adding to the nervousness on trading floors, analysts said. In April, the 266,000 increase was far below the consensus forecast of 1 million.

Michael Brown, senior market analyst at foreign exchange firm Caxton, said: “Forecasting the NFP number has always been a game of ‘throwing darts blindfolded.'”

He added: “Along with last month’s miss remaining front of mind, [this] does look to be contributing to the nervousness is present in the market this morning, evidenced by the choppy price action that we have seen early on.”

Futures for the tech-heavy Nasdaq 100 fell as much as 0.2% on Friday morning before rising into the green and then slipping back into the red. S&P 500 futures also moved in and out of positive territory.

Yet Scicluna said: “I’m not sure that markets will get carried away either way today. Indeed, the May CPI [inflation] data are just around the corner next week and will arguably be just as important.”

Stronger-than-expected jobs figures from payroll company ADP on Thursday have quelled some fears for investors, Chris Beauchamp, chief market analyst at trading platform IG, said. The figures – which cover the private sector – showed payrolls grew by 978,000 in May, blowing past consensus estimate of around 650,000.

“The revisions to last month will also be key, since they might suggest April was better than feared,” he said. “Whatever happens, it will be a relief to get some real market movement, after the snooze-fest of the past couple of weeks.”