Markets drift ahead of ECB decision, US payrolls

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Associated Press

Posted on June 3, 2014 at 11:06 AM

Updated Tuesday, Jun 3 at 11:10 AM

LONDON (AP) — Global stock markets were lackluster Tuesday as traders awaited a raft of major economic news later in the week that includes the latest policy meeting of the European Central Bank and the U.S. nonfarm payrolls report for May.

Expectations are growing that the ECB will announce a further stimulus for the 18-country eurozone economy. Figures earlier showed that inflation in the eurozone fell to 0.5 percent in the year to May. That's way down on the ECB's target of just below 2 percent. Analysts expect the ECB to cut interest rates and possibly take further measures in an attempt to get inflation back to target.

The fear among policymakers is that the eurozone may be heading toward an outright fall in prices that can dent growth by making consumers reluctant to spend as they anticipate cheaper bargains, and businesses to fail to innovate and invest.

"The latest data add to concerns that the region's feeble economic recovery is not strong enough to end the disinflationary forces in the region and will increase the pressure on the ECB to take decisive action later this week," said Ben May, an economist at Oxford Economics.

In Europe, Germany's DAX closed down 0.3 percent at 9,919.74 while the CAC-40 in France also fell 0.3 percent to 4,503.69. The FTSE 100 index of leading British shares, meanwhile, ended 0.4 percent lower at 6,836.30.

The euro was fairly steady, trading 0.2 percent higher on the day at $1.3625.

In the U.S., the main stock indexes came off after hitting record highs for the second straight day. The Dow Jones industrial average was down 0.3 percent at 16,701 while the broader S&P 500 index fell the same rate to 1,919. Traders in the U.S. are keenly awaiting Friday's jobs data to see if it may prompt a change in the Federal Reserve's current monetary policy stance.

Earlier in Asia, stocks closed mostly higher after a second Chinese manufacturing survey suggested the slowdown in the world's No. 2 economy is stabilizing.

The HSBC index, which is based on a survey of factory purchasing managers, climbed to 49.4 last month from 48.1 in April. The index uses a 100-point scale on which numbers above 50 indicate expansion. The number was weaker than 49.7 in a preliminary version of the survey because of a revision to stocks of finished goods.

Japan's Nikkei 225, the regional heavyweight, rose 0.7 percent to 15,034.25. Japanese shares have been boosted recently by renewed weakness in the yen and expectations the country's giant government pension fund will increase its holdings of shares at the expense of bonds.

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