(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, April 3 (Reuters) - U.S. stocks edged higher on
Thursday amid scattered hopes a credit crunch is easing while
the dollar posted modest gains against the euro amid fresh
signs economic growth is slowing in Europe.
Trading was choppy across the oil, currency, equity and
debt markets as investors edgily awaited a key U.S. jobs report
on Friday that will provide a better handle on the health of a
U.S. economy many economists say has entered recession
.
Oil slipped after weak U.S. employment data intensified
worries among investors that an economic slowdown could cut
deeply into energy demand by the world's top consumer.
"You have a tug-of-war going on over market focus, and it's
shifting between concern over slower growth in Europe and the
ongoing concerns about the U.S. outlook," said Michael Malpede,
senior currency strategist at Man Global Research in Chicago.
The U.S. service sector contracted for a third straight
month in March while the number of workers applying for jobless
benefits soared last week to a 2-1/2-year high, reinforcing
fears the U.S. economy has stalled.
Solace was found in the Institute for Supply Management's
gauge of the non-manufacturing economy showed the decline in
services was less severe, helping Wall Street's rise.
However, government data showing claims for unemployment
benefits jumped to 407,000, the highest since September 2005,
and raised the prospects that Friday's non-farm payrolls report
could show deep job cuts as the economy struggles.
The chief executive of Merrill Lynch & Co Inc <MER.N> told
Japan's Nikkei business daily newspaper that the bank is not in
need of more capital, kindling hopes the credit crisis is
easing.
Merrill Lynch shares rose 1.7 percent amid optimism Wall
Street's write-downs for bad assets may have peaked. Earlier
this week, the market rallied sharply after Lehman Brothers
Holdings Inc <LEH.N> and UBS AG <UBSN.VX> raised a combined $19
billion in capital to bolster their balance sheets.
"Markets are starting to pay more attention to any
indication that what caused the slowdown is no longer as
relevant as what it was six months ago," said Peter Kenny,
managing director at Knight Equity Markets in Jersey City, New
Jersey.
The Merrill story "just played into the Street's
expectation that we are turning a corner," Kenny said.
The Dow Jones industrial average <> rose 20.20 points,
or 0.16 percent, to 12,626.03. The Standard & Poor's 500 Index
<.SPX> gained 1.78 points, or 0.13 percent, to 1,369.31. The
Nasdaq Composite Index <> rose 1.90 points, or 0.08
percent, at 2,363.30.
European stocks fell as worries of further asset
write-downs weighed on the banking sector, while data showed a
slowdown in the euro zone economies.
Euro zone government bond prices rose on safe-haven bids
after the U.S. jobless claims stoked recession fears.
The FTSEurofirst 300 <> index of top European shares
unofficially closed 0.44 percent lower at 1,312.10 points,
after gaining more than 4 percent over the past two sessions
amid hopes that the worst of the bank write-downs may be over.
The DJ Stoxx European banks index <.SX7P> fell 1.85 percent
as UBS <UBSN.VX> and Britain's Lloyds TSB <LLOY.L> shed 4.7
percent and 4.2 percent, respectively.
In Asia, shares climbed strongly with investors focusing on
resource shares on a rally in gold and oil.
The MSCI's measure of Asian stocks outside Japan
<.MIAPJ0000PUS> rose 1.2 percent, hitting its highest level
since early March.
Japan's Nikkei average <>, which suffered heavily in
the first quarter, rose 1.5 percent earlier in the global
trading day.
Oil prices dipped, after earlier gains. U.S. crude <CLc1>
settled down $1.00, or 0.95 percent, at $103.83 a barrel, while
London Brent crude <LCOc1> dropped $1.23 to $102.52.
In a volatile session, the dollar also swung between gains
and losses as investors remained focused on the U.S. non-farm
payrolls report for March.
The dollar posted narrow gains as the euro <EUR=> traded
down 0.17 percent at $1.5661 from a previous session close of
$1.5687. Against the Japanese yen, the dollar <JPY=> was up
0.10 percent at 102.34 from a previous session close of
102.24.
Spot gold prices for June delivery <GCM8> settled up $9.40,
or 1 percent, to $909.60 an ounce in New York trade. Investors
also were eyeing Friday's U.S. jobs report.
Price gains in the U.S. government debt market were mixed.
U.S. Treasury debt prices were mixed. The benchmark 10-year
U.S. Treasury note <US10YT=RR> rose 5/32 to yield 3.5849
percent. The 2-year U.S. Treasury note <US2YT=RR> fell 1/32 to
yield 1.9108 percent. The 30-year U.S. Treasury bond
<US30YT=RR> rose 16/32 to yield 4.3775 percent.
