Friday, 3 July 2009

GLOBAL MARKETS: European Stocks To Edge Up; Volumes Seen Thin

GLOBAL MARKETS: European Stocks To Edge Up; Volumes Seen Thin

By Peter Nurse
Of DOW JONES NEWSWIRES


LONDON (Dow Jones)--European stocks are expected to open marginally higher Friday, as investors chase bargains after Thursday's hefty losses. However, the U.S. holiday is likely to limit activity.

"Equities may manage a small bounce after yesterday's big selloff, but with little in the way of fundamentals due and volumes likely to be depressed given the holiday across the Atlantic, it could end up being a rather uninspiring session," said Matt Buckland, a dealer at CMC Markets.

Buckland expected Europe's major indexes to largely drift at the open, with London's FTSE 100 index set to open unchanged at 4234. He also saw Frankfurt's DAX index rising 12 points to 4730, and the CAC-40 index in Paris up six points to 3122.

A weak U.S. jobs report Thursday roiled U.S stocks, resulting in a hefty selloff.

At the end of a holiday-shortened week of trading, the most eagerly anticipated report on the economy was a stark letdown. The U.S. Labor Department said nonfarm payrolls shed 467,000 jobs in June, a much greater decline than the 350,000 economists in a Dow Jones Newswires survey had expected.

Overall, the Dow Jones Industrial Average closed down 223.32 points, or 2.6%, at 8280.74. For the week, the Dow slid 157.65, or 1.9%, marking its third straight weekly decline and its lowest closing value since May 22.

The Standard & Poor's 500 flirted with 900 for much of the day, eventually pushing below that previous support level to 896.42, down 26.91 points, or 2.9%. The index lost 22.38 points, or 2.4%, on the week, also marking its third straight week in the red.

The Nasdaq Composite Index lost 49.20 points, or 2.7%, to 1796.5, finishing the week down 41.70, or 2.3%.

Asian stock markets also fell initially Friday after the dismal U.S. jobs report cast further doubt on a near-term economic recovery, but low trading volumes before the U.S. holiday prevented big declines and the markets came off their lows, with some actually closing in the black.

Japan's Nikkei 225 closed down 0.6%, but Korea's Kospi Composite closed 0.6% higher. Hong Kong's Hang Seng index was 0.1% lower.

And, "with the impact of those shocking U.S. payroll figures likely to continue being felt by the market for some time," added Buckland, "elements such as the U.K. services PMI and euro-zone retail sales figures, both due this morning, seem unlikely to provide much meaningful direction."

Elsewhere, the crude oil futures market still looks weak Friday, continuing Thursday's decline after the weak payrolls release shook confidence in an economic recovery by the world's largest energy user.

At 0630 GMT, the August crude contract on Globex was little changed at $66.81 per barrel, having settled Thursday at $66.73 per barrel, down $2.58, on the New York Mercantile Exchange.

"The unemployment data showed the economy is not turning around," said Zachary Oxman, managing director at TrendMax Futures in Encinitas, California. "The market is due for a correction and we'll see a lot of money coming out of commodities in the third quarter."

At 0630 GMT, spot gold stood at $933.25/oz, up more than $3 from late New York business Thursday.

In the foreign exchanges, the weaker-than-expected payrolls data prompted a surge in risk aversion, with the U.S. dollar rising against the euro but falling against the Japanese yen. However, some of these moves have now been reversed in Asian and early European trading.

"The U.S. is closed Friday to mark Independence Day. As such, there are no U.S. data releases, and liquidity is likely to be thin, which may result in some very choppy price action across currency pairs," said Christian Lawrence at RBC Capital Markets.

At 0630 GMT, the euro stood at $1.4014, compared with $1.4004 late Thursday in New York, with the dollar at Y96.04, higher than Y95.95.

The safe-haven sovereign debt markets have opened a touch lower Friday, as investors take profits after Thursday's sharp gains on demand for low-risk government debt. Still, trading is likely to be limited with the U.S. market closed Friday.

At 0630 GMT, the September bund contract stood at 121.63, down 0.02.

-By Peter Nurse, Dow Jones Newswires; +44-20-7842-9288; peter.nurse@dowjones.com

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(END) Dow Jones Newswires

July 03, 2009 02:41 ET (06:41 GMT)


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