* U.S. shares drop on cloudy tech outlook
* Weekly U.S. jobless claims lower than expected
* BoE, ECB keep rates unchanged
* BoE unexpectedly extends bond purchases
* Sterling, euro fall against dollar
By Daniel Bases
NEW YORK, Aug 6 (Reuters) - U.S. stocks veered away from a
global equity rally on Thursday, diverted by warnings from
technology bellwether Cisco Systems despite U.S. jobs data that
raised hopes America's economy has stopped deteriorating.
European share prices held their gains after the European
Central Bank left its record-low benchmark interest rate
unchanged at 1.0 percent.
The Bank of England held rates at 0.50 percent but stunned
investors with a larger than expected 50 billion pound increase
in its bond buying program, also called quantitative easing.
The UK government will now spend 175 billion pounds ($297
billion) to support the economy.
Sterling fell versus the U.S. dollar on the BoE's
announcement.
Tokyo shares closed at a 10-month high, with automakers
such as Honda Motor Co. <7267.T> leading way on hopes the U.S.
government will extend its popular "cash-for-clunkers"
car-buying program with another $2 billion.
U.S. Treasuries regained their footing as U.S. stocks lost
theirs, while the greenback advanced on weekly jobless claims
data. The stronger dollar contributed to losses in U.S. crude
oil after it topped $72 a barrel, a one-month high.
Cisco Systems Inc <CSCO.O>, the world's largest network
equipment manufacturer and a Dow component, was among the top
drags on the Nasdaq market after the company's cautious
comments about recovery. []
"The expectations had gotten a bit higher than the message
(Cisco Chief Executive John) Chambers delivered, and that is
carrying over from Cisco into other parts of the telecom
world," said Craig Peckham, equity trading strategist at
Jefferies & Co in New York.
Cisco's warning after the market close on Wednesday
contributed to cutting short the euphoria over initial U.S.
weekly jobless claims falling by 38,000 to a seasonally
adjusted 550,000 in the week ended Aug 1. []
Analysts said the report also bodes well for July non-farm
payrolls data due on Friday. A Reuters survey forecasts the
number of newly jobless in July at 320,000, which would be the
least for any month since September. <ECI/US>
"We should see a decline of 300,000. It's a big step in the
right direction in the labor market," said Lindsey Piegza,
market analyst at FTN Financial in New York.
MARKETS DIVERGE
U.S. benchmark stocks fell in midday New York trade. The
Dow Jones industrial average <> was down 38.24 points, or
0.41 percent, at 9,242.73. The Standard & Poor's 500 Index
<.SPX> lost 6.49 points, or 0.65 percent, at 996.23. The Nasdaq
Composite Index <> dropped 19.18 points, or 0.96 percent,
at 1,973.87.
Financial stocks gained ground in the U.S. but also led
European share indexes higher, helped in part by the BoE's bond
purchase announcement.
"In the short-term, QE will be good for markets. But the
longer-term question of what happens when stimulus stops or
(is) even withdrawn, it may not be quite positive and that's a
question for another day," said Peter Dixon, UK economist at
Commerzbank.
The FTSEurofirst 300 <> index of top European shares
closed up 0.43 percent at 934.47 points. The index is up 14 out
of the last 19 sessions and stands 45 percent above its record
low in March. However it is still down 43 percent from a 2007
multi-year peak.
The MSCI all-country world index <.MIWD00000PUS> fell from
earlier highs to a loss of 0.21 percent. However the index is
up over 56 percent from its March lows.
In credit markets, the benchmark 10-year U.S. Treasury note
<US10YT=RR> was unchanged with the yield at 3.762 percent. Bond
prices move inversely with yields.
Euro zone government bond prices dropped and the Schatz
yield hit a six-week high, after getting caught in a tug-of-war
between the BOE-inspired rally and disappointment from the
European Central Bank's chief.
Trichet's comments -- that he saw the recession bottoming
out and inflation turning positive before year end -- were
taken negatively by bond investors and that reaction surprised
some analysts. ((ECB Trichet highlights, see []))
The 10-year Bund yield <EU10YT=RR> rose 2.5 basis points to
3.372 percent. The two-year Schatz yield <EU2YT=RR> was flat at
1.47 percent, after scaling its highest level since late June
of 1.517 percent.
The euro <EUR=> was down 0.44 percent at $1.4345 while the
the dollar rose 0.80 percent against the yen at 95.67 <JPY=>.
Sterling traded down 1.24 percent to $1.6771 <GBP=>.
U.S. light sweet crude oil <CLc1> fell 68 cents, or 0.94
percent, to $71.29 per barrel, and spot gold prices <XAU=>
fell 15 cents, or 0.02 percent, to $961.80.
(Additional reporting by Jeremy Gaunt, George Matlock,
Dominic Lau, Brian Gorman, Tamawa Desai and Angela Moon;
Editing by Kenneth Barry)
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