World stocks down ahead of key US jobs data

LONDON -- World stocks mostly fell Thursday as investors braced for a crucial U.S. jobs report that could set the tone in markets for the coming few days at least.

In Europe, the FTSE 100 index of leading British shares was down 34.99 points, or 0.8 percent, at 4,305.72 while Germany's DAX fell 76.79 points, or 1.6 percent, to 4,826.85. The CAC-40 in France was 35.77 points lower, or 1.1 percent, at 3,181.21.

Wall Street was also set to open down, following modest gains on Wednesday, though that may all change in the wake of the jobs data. Dow futures were 50 points, or 0.6 percent, lower at 8,398 while the broader Standard & Poor's 500 futures fell 5.8 points, or 0.6 percent, to 913.40.

All eyes will be on the U.S. nonfarm payrolls data for June, which is due at 1.30 pm London time. The payrolls data have been brought forward from their traditional Friday slot because of tomorrow's Independence Day holiday in the U.S.

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.

"Traders will be watching with anticipation to see how these releases affect the market," said Philip Gillet, a sales trader at IG Index. "With the recent calm experienced of late today has the potential to be a bit choppier."

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 the governing council's decision to keep its interest 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 and that the central bank will continue trying to get banks to lend again by massive injections of liquidity.

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 dropped below $68 a barrel, with benchmark crude for August delivery off $1.46 cents at $67.85.

The dollar was up 0.2 percent at 96.67 yen while the euro fell 0.6 percent to $1.4066.