European stocks mixed ahead of US jobs report

[March 06, 2009]  LONDON (AP) -- European markets were mixed Friday ahead of the publication of what is expected to be an especially bleak U.S. jobs report.

By noon in mainland Europe, Britain's FTSE 100 was up 0.1 percent at 3,533.59, Germany's DAX slipped 0.6 percent at 3,673.66, and France's CAC 40 dropped 0.9 percent to 2,547.76.

Investors were awaiting a U.S. Labor Department report later in the day that economists predict will show U.S. employers slashed 648,000 jobs in February -- more than the 598,000 cut in January.

If they are right, it would mark the worst month of job losses since the recession started in December 2007. It also would represent the single biggest month of job reductions since October 1949, when the country was just pulling out of a painful recession, although the labor force has grown significantly since then.

European shares had risen in early trading, with the FTSE gaining over 1 percent. This was "mostly short-term relief after the falls we have had," according to David Hussey, London-based Head of European Equities with MFC Global Investment Management.

"The market is today waiting for more evidence out of the States on payrolls, although that is a bit of a late indicator," he said.

"We have had a terrible run on the markets; it's been pretty much a one-way bet. People have been very bearish, the economic news has been bad. It kind of feels like we are in no man's land at the moment."

Wall Street was headed for a weaker open as stock futures traded lower. Dow futures were down 0.7 percent at 6,599, while Standard & Poor's 500 futures fell 0.3 percent to 684.20.

That comes after Asian stock markets resumed their downward and after Wall Street fell to its lowest levels in more than 12 years.

The Dow fell overnight by 281.40 points, or 4.1 percent, to 6,594.44, its lowest close since April 1997. The S&P 500 index dropped 30.32, or 4.3 percent, to 682.55, the lowest close since September 1996.

Investors, already deflated after Beijing failed to deliver new stimulus measures, were forced to grapple with a warning from General Motors that the struggling automaker may have to file for bankruptcy.

Financials were also hit, with Citigroup Inc. falling below $1 a share.

"You can buy Citi at the 99 cent store now," said Paul Schulte, a chief Asia equity strategist at Nomura International in Hong Kong. "It's nauseating. We keep grasping at straws to find hope, and the markets keep punishing us."

In Asia, the losses were somewhat more muted than the sharp declines in the U.S. overnight.

Japan's Nikkei 225 stock average fell 260.39 points, or 3.5 percent, to 7,173.10, while Hong Kong's Hang Seng shed 289.72, or 2.4 percent, to 11,921.52. South Korea's Kospi was off 0.3 percent at 1,055.03.

Shanghai's benchmark swooned 1.3 percent, Australia's stock measure was 1.4 percent lower and Singapore's key index shed 0.8 percent. Bucking the trend, markets in India and Taiwan gained 1.6 percent and 0.4 percent.

China has become a growing source of hope for many investors, helping buoy sentiment in Asia at a time when the region's export-driven economies are hurting as demand dries up in industrial Western countries.

A day after Beijing stopped short of announcing new stimulus plans, the government said Friday it sees signs economic growth is recovering and is watching closely to determine whether it needs to expand its huge stimulus effort.

"It really depends on the changing situation to determine whether we need additional investment," Zhang Ping, the chairman of the country's planning body, said in Beijing. He and central bank Gov. Zhou Xiaochuan said positive data showed Beijing's policies were working so far.

Analysts said the outlook for equities was not going to improve any time soon.

"I think the markets are going to continue to tread water," said George Kanaan, managing director at UBS in Sydney. "All the companies need to get more capital and that's going to hold markets relatively down until we go through the process."

Robert Howe of asset manager Geomatrix in Hong Kong said the latest bout of selling was likely part of the second of three phases in a bear market that could last another year and a half. He pointed out that stocks investors usually pour into during turbulent times, including utilities, staple goods and pharmaceuticals, were hit this week in both the U.S. and Asia.

"Sentiment is very negative," Howe said. "What we're seeing is defensive stocks are ... getting whacked, which tells us it might be close to the end of the capitulatory period of phase two."

Oil prices were higher in European trade, with benchmark crude for April delivery up $1.09 at $44.70 a barrel by late afternoon in Singapore on the New York Mercantile Exchange. The contract fell $1.77 overnight to settle at $43.61 a barrel

[Associated Press; By LOUISE WATT]

AP Business Writers Jeremiah Marquez in Hong Kong and Joe McDonald in Beijing contributed to this report.

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