World markets down ahead of US jobs data, European Central Bank rate decision

World stocks down on US jobs unease

LONDON — World stocks mostly fell Thursday as investors braced for a crucial U.S. jobs report that is expected to show another rise in unemployment and could give markets renewed direction.

In Europe, the FTSE 100 index of leading British shares was down 33.54 points, or 0.8 percent, at 4,307.17 while Germany’s DAX fell 77.23 points, or 1.6 percent, to 4,828.21. The CAC-40 in France was 36.75 points lower, or 1.1 percent, at 3,180.25. The softer start came after most markets in Asia fell in the wake of a late retreat on Wall Street.

“What’s more, the air of caution is likely to continue with traders eyeing those non-farm payroll figures out of the U.S. this afternoon as essentially defining the mood going into the long weekend break across the Atlantic,” said Matt Buckland, a dealer at CMC Markets.

Analysts expect June’s U.S. unemployment rate to rise around 0.3 of a percentage point to a 26-year high of 9.7 percent with possibly another 400,000 jobs lost during the month. Though still high, the job losses are much smaller than the numbers recorded earlier in the year.

Economists believe a chunk of June’s losses will be tied to shutdowns at General Motors Corp. and the fallout from the troubled auto industry.

“The U.S. jobs data tends to set the tone for the financial markets at the start of the month,” said Neil Mackinnon, chief economist at ECU Group, who expects the pace of job cuts to continue to ease even as the unemployment rate edges up to the 10 percent mark.

Many economists think the U.S. unemployment rate could rise as high as 12 percent — the post-World War II high was 10.8 percent at the end of 1982.

Figures earlier showed unemployment in the 16 countries that use the euro spiked to a ten-year high in May, reinforcing concerns that any recovery will take time with so many people out of work. Eurostat, the statistics office of the EU, said the seasonally-adjusted unemployment rate for the euro zone in May was 9.5 percent, up from April’s 9.3 percent.

As unemployment is a lagging indicator, the number of jobless will likely continue to rise for a while even when the recession officially ends. Despite recent hopes that the global economic downturn may be easing, investors are fully aware that high unemployment levels will continue to weigh on consumption and sentiment for many months and years.

At the same time as the payrolls data is published in the U.S., the European Central Bank’s president Jean-Claude Trichet will be standing up for his monthly press briefing following an interest rate decision.

Though the rate-setting governing council is set to keep its benchmark rate unchanged at the record low of 1 percent, Trichet is expected to note some early signs of economic improvement while maintaining his view that recovery will take time.

Stocks around the world managed to achieved one of the best quarters in years during the second quarter — the S&P 500 index in the U.S., for example, rose around 16 percent during the quarter, its best performance since 1998 — amid hopes of a recovery around the world despite ongoing worries about the global banking system, public finances and the length and depth of the recession.

Earlier, most Asian markets fell, with Tokyo’s Nikkei 225 stock average closing down 63.78 points, or 0.6 percent, at 9,876.15, while Hong Kong’s Hang Seng fell 200.68 points, or 1.1 percent, to 18,178.05.

Elsewhere, Korea’s Kospi closed flat in back-and-forth trade. Markets in Australia and Shanghai gained while Taiwan’s benchmark rose 1.4 percent.

Oil prices slipped below $69 a barrel, with benchmark crude for August delivery off 94 cents at $68.37.

The dollar was up 0.1 percent at 96.63 yen while the euro fell 0.4 percent to $1.4098.

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