Markets take breather ahead of US jobs data

February 2, 2012 - 11:55 AM

LONDON (AP) — Markets took a breather Thursday after solid gains in the previous session, as investors positioned themselves for crucial U.S. jobs data that often set the tone for a week or two after their release.

A recent run of solid U.S. economic news has reinforced hopes that Friday's nonfarm payrolls data will provide further evidence that the world's largest economy is over its soft patch from last summer.

The consensus in the markets is that the U.S. economy generated around 170,000 jobs during January. Though that is unspectacular for an economy recovering from its worst recession since World War II, the amount of jobs being created is up from levels seen just a few months ago.

The pickup in the U.S. economic data, in general, has also helped support market sentiment at a time when there is a huge amount of uncertainty relating to Europe's debt crisis, despite more successful bond auctions Thursday from France and Spain.

Jobless claims figures released Thursday showing a 12,000 decline last week were met with some relief, as last week's figures had shown a bigger than anticipated 24,000 increase.

"The trend remains friendly and supportive of further gains in hiring," said Jennifer Lee, an analyst at BMO Capital Markets.

A raft of earnings in Europe have also helped maintain trading activity, as has confirmation that mining company Xstrata PLC is in merger discussions with commodities trader Glencore International PLC. A deal would create a company with revenues of around $175 billion and the news has helped both share prices rally in London.

The share price rises of both companies helped Britain's FTSE 100 index of leading shares rise 0.2 percent to 5,801. Meanwhile, Germany's DAX rose 0.4 percent to 6,642 and the CAC-40 in France was 0.3 percent higher at 3,377.

The euro was also subdued after recent gains, trading 0.3 percent lower at $1.3133.

In the U.S, the Dow Jones industrial average was flat at 12,717 while the broader Standard & Poor's 500 index rose 0.2 percent to 1,326.

Investors will also be monitoring comments later from Federal Reserve Chairman Ben Bernanke during testimony to lawmakers in Congress. In prepared testimony, he warned that developments in Europe or elsewhere could "worsen economic prospects at home."

Bernanke is testifying a week after the Fed signaled that a full recovery could take at least three more years. As a result, the Fed said it doesn't plan to raise its benchmark interest rate from a record low before late 2014 at the earliest.

The focus on the U.S. over the rest of the week will have proved a welcome diversion for some traders from monitoring the daily grind of Europe's debt crisis, where much hinges on whether Greece can secure a deal with its private creditors, as is anticipated.

A deal is expected in a matter of days, according to officials, though that has been the official line for a few weeks.

"Given that it's Groundhog Day today its particularly apt that Greece continues to be the center of continued speculation about what's happening with respect to the debt talks and the latest bailout," said Michael Hewson, markets analyst at CMC Markets.

"Even so, markets are now so bored with it, any comments by EU officials are now being dismissed with a perfunctory shrug and an 'I'll believe it when I see it' attitude," Hewson added.

Earlier in Asia, Tokyo's Nikkei 225 rose 0.8 percent to 8,876.82 while Hong Kong's Hang Seng shot up 2 percent to 20,739.45 and Seoul's Kospi added 1.3 percent to 1,984.30.

China's benchmark Shanghai Composite Index climbed 2 percent to 2,312.56 on Thursday amid signs manufacturing improved in January for a second straight month.

Oil prices were subdued alongside other markets — benchmark oil for March delivery fell 86 cents to $96.75 per barrel Thursday in electronic trading on the New York Mercantile Exchange.

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Alex Kennedy in Singapore contributed to this report.