LONDON (AP) -- With a large chunk of Europe on holiday, financial markets were muted Wednesday ahead of a policy statement from the Federal Reserve.
A couple of soft economic reports raised concerns over the state of the U.S. economy but reinforced market expectations that the Fed will persevere with its super-easy and cheap monetary policy for a bit longer than had been anticipated.
The Fed finishes its two-day meeting later Wednesday and a statement will be published with investors keen to see if there is any change in tone over the central bank's view of the economic outlook.
Wednesday's data dump will likely have strengthened the hand of the most dovish members of the Federal Open Market Committee.
First, ADP reported that private employers in the U.S. added only 119,000 jobs last month, down from March's gain of 131,000 and below market expectations for a 150,000 increase.
That was followed by a fall in the Institute for Supply Management's main manufacturing index to 50.7 in April from 51.3 in March. Though that was marginally ahead of market expectations for a fall to 50.5, the index is just above the 50 threshold that indicates an expansion in activity. Particularly concerning was a sharp fall in the employment component of the index, all the more so after the weak ADP figures and ahead of Friday's nonfarm payrolls data for April.
"The spring lull continues....and it is just April," said Jennifer Lee, an analyst at BMO Capital Markets.
As a result, U.S. shares drifted lower, with the Dow Jones industrial average down 0.4 percent at 14,774 while the S&P 500 index fell 0.4 percent to 1,591.
In Europe, there was little going on with most markets closed for the May Day holiday. Of the major indexes, only Britain's FTSE 100 was trading and it was 0.25 percent higher at 6,446.
Earlier in Asia, the yen's appreciation weighed on the Nikkei 225 index, which fell 0.4 percent to close at 13,799.35. Japan's exporters have seen their share prices shoot up over the past few weeks on the back of the yen's fall which makes their products more competitive in international markets. The U.S. data added to the dollar's soft tone and it was trading 0.3 percent at 97.14 yen.
The tone in Asia was generally subdued after a survey showed the pace of China's manufacturing growth slowed in April, raising fears of a weaker recovery in the world's second-largest economy. Chinese markets were closed though so couldn't react to the news.
Oil prices dipped following a strong run and the downbeat U.S. data, with the benchmark New York rate down $2.55 at $90.91 a barrel.
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