Global shares, oil dip before US payrolls
LONDON, May 4 — European shares lost ground today and Brent crude dipped towards its steepest weekly fall this year, before a reading on the US jobs market that could sharpen concerns about the health of the world’s biggest economy.
Investors also kept a wary eye on weekend elections in France and Greece, amid signs that Europe’s recession could last longer than feared.
The voting is likely to provide a litmus test of popular tolerance for further austerity, a day after the European Central Bank ended near-term hopes of more policy easing to boost the ailing euro zone economy.
The FTSEurofirst 300 index of top European shares was down 0.7 per cent by 0825 GMT, after losing ground late the previous day, with bank shares weaker after results from BNP Paribas focused attention on European lenders’ efforts to weather the region’s debt crisis.
The euro zone’s services sector shrivelled at a much faster rate in April than initially thought, a PMI business survey showed today, suggesting the bloc’s recession could extend through to mid-year.
Expectations for US non-farm payrolls, due at 1230 GMT, have been scaled back this week. A Reuters consensus forecast suggests the economy added 170,000 jobs in April, up from March’s 120,000.
But a recent run of data showing tepid growth in the US services sector and a slowdown in private sector hiring raised concerns the recovery that drove equity markets higher in early 2012 is stalling, and some traders are now positioning for between 125,000 and 150,000.
“The whispers on Wall Street hint it will be a disappointing result,” IG Markets strategist Stan Shamu said.
Last month, the data came well below estimates, sparking fears of a growth slowdown, and another disappointing result this time was seen likely to put the dollar under pressure, dealers said.
The euro dipped 0.15 per cent against the dollar to US$1.3129 following the weak PMI reading, but stayed above a two-week low of US$1.3095 that it hit yesterday before ECB chief Mario Draghi said any growth initiatives would have to come from governments rather than the central bank.
In France, the country’s top bank BNP said it had almost wrapped up its plan to sell assets and cut debt to strengthen its financial firepower, after first-quarter profits were boosted by the sale of shares in Klepierre.
But its shares fell 0.5 per cent by 0845 GMT as markets focused on efforts by the industry to meet tougher incoming lending rules in a slowing European economy.
“I thought the results were good,” said Yohan Salleron, fund manager at Mandarine Gestion. “Despite this, the negative reaction suggests still the environment of doubts over bank stocks, particularly in France, where investors seem to want to wait it out until the presidential elections are over.”
Bond markets were little changed, with front-month German Bund futures down 0.06 at 141.65.
The yield on French 10-year bonds debt also held steady, as did its premium over German benchmark debt, with markets anticipating Socialist frontrunner Francois Hollande will tone done rhetoric on possible fiscal easing should he, as expected, beat incumbent Nicolas Sarkozy in Sunday’s run-off vote for the presidency.
“France is probably in the price, that Hollande is going to win,” said one trader. “Greece is probably the more dangerous one in a way if you get some sort of anti-European (government).”
In Greece, failure by the two main Greek parties to secure a comfortable majority in Sunday’s elections could put pressure on struggling debt euro zone peripheral debt markets.
“If Greece’s coalition doesn’t get enough members of parliament then definitely there will be underperformance by the periphery,” Lloyds Bank strategist Achilleas Georgolopoulos said. “The market reaction will be more evident on the periphery, with Spain and Italy hit the hardest.”
Global economic concerns left Brent crude poised for its steepest weekly fall in months, and the oil benchmark fell 46 cents to US$115.68 a barrel by 0743 GMT.
Brent is poised to fall 3 per cent this week, its steepest slide since the week ended December 18, while US oil is set to drop more than 2 per cent, its biggest weekly decline in a month. — Reuters