European markets give up gains on weak US jobs data; euro buoyed by inflation surprise

European stocks give up gains on weak US jobs data

LONDON — European stock markets fell Wednesday after disappointing U.S. jobs data stoked concerns that official government figures later in the week will come in weaker than anticipated — a sign that recovery in the world’s largest economy may not be as strong as many investors predict.

The FTSE 100 index of leading British shares was down 23.68 points, or 0.4 percent, at 5,648.64 while Germany’s DAX fell 28.86 points, or 0.5 percent, to 6,113.59. The CAC-40 in France was 14.58 points, or 0.4 percent, lower at 3,972.83.

Earlier, European stocks had been trading high following a bright finish on Wall Street on Tuesday.

But the news from the ADP payrolls firm that the U.S. private sector shed 23,000 jobs in March dampened the mood, particularly about Wall Street’s open — Dow futures were down 44 points, or 0.4 percent, at 10,810 while the broader Standard & Poor’s 500 futures slid 5.7 points, or 0.5 percent, to 1,163.70.

The ADP survey came ahead of Friday’s U.S. nonfarm payrolls data for March — traditionally this can set the market tone for a week or two but this month’s figures will be released as many traders head off for the Easter break. All major stock indexes in Europe and the U.S. are closed for Good Friday.

Before the ADP report, the consensus in the markets was for a net gain in payrolls of around 170,000 jobs in March though there already was uncertainty surrounding the data related to hiring for the U.S. census and ongoing weather factors.

Analysts now are less confident that the U.S. economy created that many jobs.

“The ADP survey is arguably giving us a more accurate reading on the underlying health of the labour market right now because the official payrolls figures will be distorted by the temporary hiring linked to the census and the after effects of the severe winter weather in February,” said Paul Ashworth, senior U.S. economist at Capital Economics, who was already anticipating a below-consensus 150,000 gain for March.

The risks, he said, are “probably now on the downside, but we do still expect a solid positive number thanks to those temporary factors.”

The euro, meanwhile, rallied 0.6 percent to $1.3496 after official figures showed inflation in the 16 countries that use the euro spiked to its highest level in 15 months during March. The dollar rose 0.2 percent to 93 yen.

In its preliminary estimate for the year to March, Eurostat, the EU’s statistics office, said consumer prices in the eurozone rose by 1.5 percent, way above February’s equivalent rate of 0.9 percent and market expectations for a more modest increase to 1.2 percent.

Eurostat did not provide any more details but a fuller analysis of why inflation jumped to its highest level since December will emerge on April 16, when a broader analysis is published.

Despite the euro’s advance Wednesday, the currency continues to be dogged by worries surrounding Greece’s debt crisis.

Even though the European Union finally agreed a backstop for the debt-laden country last week, investors remain concerned about the Greek government’s ability to tap the financial markets for more cash — two bond issues this week met with muted success.

The most visible sign of unease in the markets is in the spread between Greek and German 10-year bond yields — the so-called spread between the two is indicative of investor unease, rising as it has to over 3.4 percentage points.

The current spread is more or less the same as before the rescue plan’s announcement last Thursday and up from the 3.06 percentage points on Monday.

“Clearly last week’s EU support mechanism has failed to have the desired impact of reassuring markets and investors are continuing to demand a premium to hold Greek debt and since this is incompatible with the need of Greece to keep its funding costs down, the Greek government may still stumble into a funding crisis later this year,” said Jane Foley, research director at Forex.com.

“This worry should alone be sufficient to prevent the euro from a concerted turn around against the dollar in the months ahead,” Foley added.

In Asia, trading was fairly lackluster. Japan’s benchmark Nikkei 225 stock average ended down 7.20 points, or less than 0.1 percent, at 11,089.94 while Hong Kong’s Hang Seng fell 135.44 points, or 0.6 percent, at 21,239.35. south Korea’s index fell less than 0.5 percent to 1,692.85.

Australia’s benchmark dropped 0.8 percent and China’s Shanghai index was off 0.6 percent.

Benchmark crude for May delivery was up 87 cents at $83.24 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 20 cents to settle at $82.37 on Tuesday.