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Markets subdued amid mixed US jobs signals

Associated Press

LONDON (AP) — Markets remained subdued Wednesday despite some moderately encouraging U.S. jobs figures as investors awaited a key government report later in the week and more clarity over Spain's request for a bailout.

The U.S. economy is in the spotlight this week. A run of economic indicators will culminate with Friday's non-farm payrolls figures for September, which often set the tone for the markets for some time after their release.

Ahead of those figures, investors were encouraged to see a report from ADP showing private payrolls up 162,000 during the month. However, the optimism was guarded as a similarly-positive report last month failed to be replicated in the official government data and the employment component of the services sector report from the Institute for Supply Management, also published Wednesday, disappointed.

"The service sector carries a heavy weight," said Robert Kavcic, an analyst at BMO Capital Markets. "As such our call for September payroll growth remains unchanged at 110,000."

In Europe, sentiment was also doused by a survey of the continent's services sector showing weakness in the key economies of Germany and France and sharp downturns in financially weakened countries like Spain.

By late afternoon in London, the FTSE 100 index of leading British shares was up 0.3 percent at 5,825 while Germany's DAX was up 0.2 percent at 7,322. The CAC-40 in France was down 0.2 percent at 3,406.

In the U.S., the Dow Jones industrial average was up 0.3 percent at 13,450 while the broader S&P 500 index rose 0.2 percent to 1,449.

Elsewhere, the euro was down slightly, 0.04 percent at $1.2902 and the benchmark New York oil price was $2.94 lower at $88.94 a barrel.

Investors have also become cautious since Spain's Prime Minister Mariano Rajoy said this week that his government was not on the verge of asking for financial aid as it seeks to get a grip on its public finances.

Spain is under pressure to ask for financial assistance from the European Central Bank to keep a lid on its borrowing costs but the government has been reluctant to do so because it may come with conditions on its budget policies. Germany is also pushing Madrid to delay such a move because the government in Berlin is wary of presenting yet another rescue plan for a vote in parliament.

Spain's borrowing rates have come down since the ECB announced in September its new bond-buying plan. On Wednesday, the interest rate on the country's 10-year bond was flat around 5.75 percent.

"Investors will not wait indefinitely and it is very possible that it will take another surge in Spanish bond yields to provide Rajoy with the reason to finally request aid," said Jane Foley, an analyst at Rabobank International.

Earlier, trading was lackluster in Asia. Japan's Nikkei 225 fell 0.5 percent to close at 8,746.87 while Hong Kong's Hang Seng seesawed until closing 0.2 percent higher at 20,888.28.

Australia's S&P/ASX 200 gained 0.1 percent to 4,438.60, a day after the country's central bank cut its benchmark interest rate by a quarter percentage point in response to global economic uncertainties. Earlier, the benchmark touched its high point for the year at 4,454.60 in morning trading before dropping back.

Markets in mainland China and South Korea were closed for public holidays.

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