European markets edge up ahead of rate decisions; Asian stocks down on profit-taking

European stocks edge up ahead of rate decisions

LONDON — European stock markets edged higher Thursday after two days of losses as investors positioned themselves for key statements on central bank plans and new jobs data.

The FTSE 100 index of leading British shares was up 6.62 points, or 0.2 percent, at 4,390.04, while Germany’s DAX rose 33.85 points, or 0.7 percent, at 5,088.38. The CAC-40 in France was 31.50 points, or 1 percent, higher at 3,341.15.

European stocks fell sharply on Wednesday after disappointing U.S. economic data stoked renewed concerns about the state of the world’s largest economy ahead of a crucial jobs report at the end of the week.

Those concerns spilled through into the Asian session where investors booked some profits made on Wednesday when the rest of the world was in retreat. Japan’s benchmark Nikkei 225 stock average fell 72.71 points, or 0.8 percent, to 9,668.96. Hong Kong’s Hang Seng shed 73.7, or 0.4 percent, to 18,502.77, but was down over 2 percent earlier.

“The performance of Asia was a mirror image of New York: let’s take some money off the table and have a think,” said David Buik, markets analyst at BGC Partners.

On Wednesday, the Dow Jones industrial average fell 0.8 percent to 8,675.24 while the broader Standard & Poor’s 500 index fell 1.4 percent to 931.76.

Wall Street was expected to reap some of those losses at the open later. Dow futures rose 34 points, or 0.4 percent, to 8,703 while the S&P 500 futures were up 4.3 points, or 0.5 percent, at 936.60.

Investors will be closely monitoring interest rate decisions from the European Central Bank and the Bank of England later. Though they are expected to keep their benchmark rates at 1 percent and 0.5 percent respectively, investors will be interested to see what the two banks say about the economic outlook after some recent encouraging data.

And while the Bank of England is expected to continue with its program of buying up 125 billion pounds worth of government and corporate bonds, the European Central Bank is set flesh out details of its plan to buy €60 billion worth of covered bonds from the banks.

“At the ECB there is still the open question of another rate cut and the market should watch for use of the word ‘appropriate’ in the ECB statement,” said David Keeble, an analyst at Calyon Credit Agricole.

“We think it stays, mainly due to pressure from the German members,” said Keeble.

The markets will also be interested to see what bank President Jean-Claude Trichet says about the euro, which has risen sharply against the dollar in recent weeks. A higher euro makes life even more difficult for the euro zone’s already hard-pressed exporters. The main reason why the recession in the euro zone is deeper than that being experienced in the U.S. or Britain is that demand for high-value exports, such as cars and machinery, have slumped with the collapse in world trade.

Over the last day or so the euro has fallen back towards $1.42 from over $1.43 amid increasing expectations that Trichet will weigh into the euro debate.

“Trichet can give the move some extra help by expressing either concern about the strength of the euro or by expressing support for a stronger dollar,” said Neil Mackinnon, chief economist at ECU Group.

The big event this week though is likely to be Friday’s U.S. non-farm payrolls report for May. Figures Wednesday from the ADP payrolls firm indicated that another fairly grim set of figures could emerge.

The rally in stock markets since mid-March has been fueled by a run of better than expected economic data, particularly out of the U.S. As stocks usually start rallying between 6-9 months before actual recovery emerges in the official data, investors have bet that the massive sell-off in markets was overdone.

If the data starts to continually come in below expectations, then investors may have to start revising down their recent optimistic tendencies.

Meanwhile in Britain, political concerns have begun to impact upon investment decisions, as the pressure on Prime Minister Brown and his governing Labour Party has intensified following the resignation of Hazel Blears, the communities secretary, from the Cabinet. She is the fourth member of the government to resign in the past day or two.

Elsewhere in Asia, South Korea’s Kospi swooned 36.75, or 2.6 percent, to 1,378.14. Benchmarks in Australia and Taiwan were off around 2 percent.

Oil prices recouped some of Wednesday’s losses, with benchmark crude for July delivery up $1.11 to $67.23 a barrel. The contract tumbled $2.43 overnight.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.