US jobs, service data weigh on world markets

European and U.S. stock markets fell Wednesday after surveys revealed that American employers shed more jobs than anticipated and the health of the country’s service sector worsened last month.

In Europe, the FTSE 100 index of leading British shares was down 0.6 percent to 4,644.69, while Germany’s DAX lost 1.2 percent to 5,353.01. The CAC-40 in France slipped 0.5 percent to 3,458.53. All three indexes had been higher in the morning after a solid batch of earnings.

In midday trading in New York, the Dow Jones industrial average was down 1 percent at 9,231.24, while the broader Standard & Poor’s 500 index fell 0.8 percent to 997.78.

Investors were discouraged after the U.S. Institute for Supply Management reported that business at service companies was weaker than expected last month. The trade group’s services index, a measure of the health of retail, financial services, transportation and health care companies, fell to 46.4 from 47 in June, marking the 10th straight month of declines. A reading below 50 indicates the sector is shrinking.

In other bad news, a survey from payrolls firm ADP Wednesday showed that U.S. private sector employers shed 371,000 jobs in July. That stoked fears that Friday’s official government data ? which often set the tone for equities ? may be worse than anticipated. Analysts were expecting ADP to show 350,000 jobs were lost.

“Clearly the trend of economic data in recent weeks is positive, but we could see a little bit of profit taking over the next few days based on the fact that it is going to take some time before the jobs market really starts to improve,” said Michael Sheldon, chief market strategist at RDM Financial.

Earlier, earnings, which have helped drive many of the world’s markets up to 2009 highs over the last few weeks, helped Europe’s main indexes push into positive territory despite earlier Asian losses.

Most interest was on earnings from bailed out British bank Lloyds Banking Group PLC. Though it reported a massive 3.1 billion pound ($5.3 billion) loss for the first half of the year, the share price rose 10 percent as investors backed management’s confidence that most of the bad loans had been identified and accounted for.

Other banks in Britain rose in Lloyds’ slipstream, most notably Royal Bank of Scotland Group PLC, which is majority-owned by the British government and unveils its own results on Friday. Its shares were up 7 percent, while Barclays PLC, which earlier this week reported bumper profits for the second quarter of the year, rallied another 3 percent.

In France, shares in Societe Generale SG spiked 6 percent after the bank posted better-than-expected second-quarter profits and revealed that its corporate and investment banking division saw its revenues nearly double.

Meanwhile, in Germany, Adidas AG topped the DAX leaderboard, rising over 6 percent after the sportswear company indicated that conditions may be improving.

Though the earnings merited interest in the markets, most investors remained cautious ahead of some key economic events this week, including interest rate decisions from the Bank of England and the European Central Bank. Because both banks are set to keep their benchmark rates unchanged at 0.5 percent and 1 percent respectively, more interest will be on what the two say about alternative measures to boost the quantity of money in their respective economies.

Most interest though will be on Friday’s U.S. jobs report for July, which often sets the tone in the markets for a few weeks. Unemployment stands at a 26-year high of 9.5 percent and is expected to eventually top 10 percent. Investors are looking for the pace of layoffs to slow so the economy can heal.

Earlier in Asia, Japan’s Nikkei 225 stock average closed down 122.48 points, or 1.2 percent, at 10,252.53 amid weakness in automakers after Toyota Motor Co., the world’s biggest car company, reported its third straight quarterly loss previous day.

Hong Kong’s Hang Seng slipped 301.66, or 1.5 percent, to 20,494.77 and South Korea’s Kospi dropped 0.4 percent to 1,559.47. Elsewhere, China’s Shanghai Composite Index retreated 1.2 percent, Australia’s benchmark fell 1 percent and Singapore’s index was off 1.9 percent. Markets in the Philippines were closed for the funeral of former President Corazon Aquino.

Oil prices slipped below $71 a barrel. Benchmark crude for September delivery was down $1.06 to $70.36 in electronic trading on the New York Mercantile Exchange.

Copyright 2009 The Associated Press.