World stocks down as US jobs data loom

[February 04, 2010]  LONDON (AP) -- World stocks fell Thursday as investors took a breather ahead of Friday's key U.S. jobs data, which are expected to shed more light on the recovery in the world's largest economy and could well set the tone in markets for a week or two.

In Europe, the FTSE 100 index of leading British shares was down 19.98 points, or 0.4 percent, at 5,510.06 while Germany's DAX fell 52.78 points, or 0.9 percent, to 5,981.55. The CAC-40 in France was 21.55 points, or 0.5 percent, lower at 3,996.12.

Wall Street was also poised for a modest retreat at the open -- Dow futures were down 32 points, or 0.3 percent, at 10,484 while the broader Standard & Poor's 500 futures fell 4.3 points, or 0.4 percent, to 1,128.70.

The U.S. economy is at the forefront of investors' attention in the first trading week of the New Year. Since Monday's big gains following strong global manufacturing data, trading has been lackluster.

"Overall sentiment for equities may remain on balance bullish but there's a growing degree of inertia creeping into markets as the New Year gets established," said Ben Potter, research analyst at IG Markets.

The markets are awaiting Friday's U.S. nonfarm payrolls report for December, with many market participants predicting that the figures could show jobs rising for the first time in two years.

However, the consensus in the markets at the moment -- especially after a weaker than anticipated report from private payrolls firm ADP -- is that around 10,000 jobs were shed during December.

"Markets are in suspense today ahead of tomorrow's payroll report (and) some profit-taking in equities is possible," said Kit Juckes, chief economist at ECU Group.

The key driver to stock market performance, at least in the first part of the year, will likely be whether economic figures back up the optimism that is evident in company valuations following a nine month bull run.

Stock markets around the world rallied strongly since March's lows -- the Dow and the S&P 500 for example surged more than 60 percent since then -- as investors grew more optimistic about the global economic recovery after central banks and governments pushed through extraordinary policy measures to mitigate the deepest recession since World War II.

The minutes to the last rate-setting meeting of the U.S. Federal Reserve -- published Wednesday -- backed up that underlying sentiment somewhat. The Federal Open Market Committee was more optimistic about the economic outlook, though it did warn of ongoing risks to the recovery stemming from the precarious state of the U.S. housing market and the reluctance of banks to lend to businesses and households.

ECU Group's Juckes said the minutes indicated that the Fed will not be raising its benchmark rate from its current record low of between 0-0.25 percent any time soon even if the economic data continues to improve.

"That is a recipe for equity markets to push higher," he said.

The Bank of England is expected to keep its benchmark interest rate unchanged at the record low of 0.5 percent later and continue with the current level of its asset buying program at least until next month when the central bank will be armed with its latest quarterly economic projections.

"With this today and nonfarm payrolls tomorrow, equity markets appear to be pausing for a breath after the big New Year rally," said Richard Griffiths, senior equity trader at Spreadex.

Earlier in Asia, Tokyo's Nikkei 225 stock average lost 49.79 points, or 0.5 percent, to 10,681.66 while Hong Kong's Hang Seng fell 147.22 points, or 0.7 percent, to 22,269.451. South Korea's Kospi lost 1.3 percent to 1,683.45.

In mainland China, Shanghai's market slid 1.9 percent to close at 3,192.78 amid reports the government might set lower lending targets that could mean less money flowing through the economy and supporting growth and asset prices.

Australia's index lost 0.5 percent and Taiwan's market was off 1.1 percent.

Oil prices fell as investors worried a 20 percent rally in the last few weeks isn't justified by sluggish U.S. crude demand. Benchmark crude for February delivery was down 66 cents to $82.52 a barrel. On Wednesday, the contract rose $1.41 to settle at $83.18, a 15-month high.

The dollar strengthened by a further 0.7 percent to 93 yen after Japan's new finance minister called for a weaker yen.

In unusually explicit remarks for a Japanese finance minister, Naoto Kan vowed to work closely with the central bank to steer the currency toward an "appropriate" level around 95 yen to the dollar.

Kan takes over from Hirohisa Fujii, whose health problems led the 77-year-old to resign Wednesday after just four months as the top finance official.

Meanwhile, the euro was down 0.5 percent on the day at $1.4336.

However, the euro was not affected by a surprise 1.2 percent slide in eurozone retail sales in November as it was offset by an encouraging economic survey from the European Commission.

[Associated Press; By PAN PYLAS]

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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