* U.S., European equities drop ahead of US payrolls report
* Euro gains evaporate as profit-taking ensues after data
* FTSEurofirst 300 closes 0.2 percent lower
* U.S. Treasuries prices rise on safety bid
(Adds close of European markets)
By Jennifer Ablan
NEW YORK, Aug 5 (Reuters) - U.S. and European stocks
dropped on Thursday after an unexpected rise in weekly U.S.
jobless claims underscored the weakening economy, and the euro
slipped a day ahead of the U.S. government's monthly payrolls
report.
The number of Americans making new claims for jobless
benefits rose by 19,000 to 479,000 in the week ended July 31 --
the highest level in nearly four months. For details, see
[] The news, coming a day ahead of the U.S.
government's closely watched monthly payrolls report, put
investors on edge, as stubbornly high unemployment has fueled
concerns on sustainable global growth.
Treasuries prices rose on a safety bid as investors braced
for the employment report, and oil and commodity prices slipped
on slowing demand. Copper prices were also hit by worries about
the outlook for the real estate market in China, the world's
largest consumer of the industrial metal.
China's banking regulator ordered lenders to test the
impact of a fall in house prices of up to 50 percent in key
cities where prices have risen sharply, banking and regulatory
sources said on Thursday. []
But the U.S. labor market stole the spotlight on Thursday
following the surprisingly weak jobless claims report.
"Claims have been maddeningly stubborn to come down, and
that could make for a rough tomorrow," said Bruce Zaro, chief
technical strategist at Boston's Delta Global Advisors.
Economists polled by Reuters expect Friday's U.S. Labor
Department report to show a drop of 65,000 in non-farm payrolls
in July, hurt by the unwinding of the government's hiring for
the census. Private employers are expected to have added 90,000
jobs. []
The Dow Jones industrial average <> was down 35.76
points, or 0.33 percent, at 10,644.67. The benchmark Standard &
Poor's 500 Index <.SPX> was down 4.49 points, or 0.40 percent,
at 1,122.75. The Nasdaq Composite Index <> was down 12.71
points, or 0.55 percent, at 2,290.86.
U.S. stocks were also hurt by July retail sales that were
mostly weaker than expected.The data was a sign that
skittishness about high unemployment and economic conditions
were causing consumers to cut back. []
Shares of department store operator JC Penney Co Inc
<JCP.N> fell 6.5 percent to $22.41 while youth-oriented apparel
chain Aeropostale Inc <ARO.N> slumped 5.1 percent to $26.04.
"The sales data was unimpressive and points to a consumer
who is tapped out," said Joseph Battipaglia, market strategist
at Stifel Nicolaus in Yardley, Pennsylvania. "If payrolls don't
increase and incomes don't rise, it's going to be a bleak
picture for retailers for the rest of the year."
Global equities measured by the MSCI All-Country World
Index <.MIWD00000PUS> also was down on the U.S. data, off 0.05
percent, while the Thomson Reuters global stock index
<.TRXFLDGLPU> dipped 0.06 percent.
European shares closed lower. The pan-European FTSEurofirst
300 index of top shares <> shed 0.2 percent to 1,068.98
points, slipping from three-month highs hit earlier in the
session.
Higher-than-expected profits from Barclays <BARC.L> and
Commerzbank <CBKG.DE> failed to dispel concerns over the
underlying health of Europe's top banks. The lenders shed 4.7
and 2.2 percent, respectively.
Japan's Nikkei <> closed up 1.7 percent, helped by top
carmaker Toyota Motor Corp <7203.T><TM.N>, which reported its
best operating profit in two years.
SUMMER LOVE FOR EURO EVAPORATES
The euro saw selling pressure after being boosted earlier
Thursday by solid German industrial data and signs that Spain
and Greece were making progress in trimming budget deficits.
The euro was flat at $1.3150 <EUR=>. Earlier it rose to
$1.3234 after the U.S. jobless claims data.
A strong debt auction in Spain and a vote of confidence
from the International Monetary fund in Greece's efforts to cut
the deficit also boosted euro buying during European trade. For
more see []] and []
Spain sold 3.5 billion euros in three-year bonds at a lower
yield than a previous auction in June, suggesting solid demand
as it copes with fiscal problems. []
Earlier, both the Bank of England and the European Central
Bank kept interest rates unchanged, as expected.
The ECB president, Jean-Claude Trichet, said third-quarter
euro zone economic data has come in stronger than expected so
far but the central bank still expects the bloc's economic
recovery to be moderate and uneven. []
Conversely, the dollar was up against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
climbing 0.05 percent at 80.93 from a previous session close of
80.892. Against the Japanese yen, the dollar <JPY=> was down
0.38 percent at 85.95 from a previous session close of 86.280.
U.S. Treasury debt prices were higher.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
15/32, with the yield at 2.90 percent. The 2-year U.S. Treasury
note <US2YT=RR> was up 2/32, with the yield at 0.54 percent.
The 30-year U.S. Treasury bond <US30YT=RR> was up 28/32, with
the yield at 4.04 percent.
In energy and commodities prices, U.S. light sweet crude oil
<CLc1> fell 57 cents, or 0.69 percent, to $81.90 per barrel,
and spot gold prices <XAU=> fell $1.80, or 0.15 percent, to
$1193.40. The Reuters/Jefferies CRB Index <.CRB> was down 0.72
points, or 0.26 percent, at 278.26.
(Additional reporting by Jeremy Gaunt in London and Leah
Schnurr and Steven C. Johnson in New York; editing by Leslie
Adler)
