* U.S., European equities drop ahead of US payrolls report
* Euro steadies toward in late-trading to end higher
* U.S. Treasuries prices rise on safety bid
(Updates with U.S. markets close)
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
ended slightly stronger against the dollar 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.
"The claims data today was miserable and obviously it has a
negative implication for the non-farm number tomorrow," said
Phil Orlando, chief equity market strategist at Federated
Investors, in New York.
"But the important thing tomorrow is going to be what are
the organic, permanent underlying trends in private payroll,
manufacturing payrolls, household survey, etc."
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 5.45
points, or 0.05 percent, at 10,674.98. The benchmark Standard &
Poor's 500 Index <.SPX> was down 1.43 points, or 0.13 percent,
at 1,125.81. The Nasdaq Composite Index <> was down 10.51
points, or 0.46 percent, at 2,293.06.
Weakness in consumer spending trends also stayed in focus
as the 28 retailers tracked by Thomson Reuters reported July
same-store sales that rose only 2.9 percent -- falling short of
analysts' expectations for a 3.1 percent gain. []
Shares of department store operator JC Penney Co Inc
<JCP.N> fell 7.7 percent to $22.12 while youth-oriented apparel
chain Aeropostale Inc <ARO.N> slumped 5.7 percent to $25.88.
"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> were up slightly, climbing 0.14 percent,
while the Thomson Reuters global stock index <.TRXFLDGLPU> rose
0.10 percent.
European shares closed lower. The pan-European FTSEurofirst
300 index of top shares <> shed 0.23 percent to 1,068.58
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
After a volatile session, the euro ended the day slightly
stronger against the dollar as investors positioned themselves
ahead of the U.S. payrolls report.
The currency got a nice boost earlier Thursday by solid
German industrial data and signs that Spain and Greece were
making progress in trimming budget deficits.
The euro <EUR=> was up 0.21 percent at $1.3186. 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 down against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
dipping 0.16 percent at 80.766 from a previous session close of
80.892. Against the Japanese yen, the dollar <JPY=> was down
0.57 percent at 85.79 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
13/32, with the yield at 2.91 percent. The 2-year U.S. Treasury
note <US2YT=RR> was up 2/32, with the yield at 0.53 percent.
The 30-year U.S. Treasury bond <US30YT=RR> was up 15/32, with
the yield at 4.06 percent.
In energy and commodities prices, U.S. light sweet crude oil
<CLc1> fell 43 cents, or 0.52 percent, to $82.04 per barrel,
but spot gold prices <XAU=> rose 40 cents, or 0.03 percent, to
$1195.60. The Reuters/Jefferies CRB Index <.CRB> was down 1.31
points, or 0.47 percent, at 277.67.
(Additional reporting by Jeremy Gaunt in London and Leah
Schnurr and Steven C. Johnson in New York; editing by Leslie
Adler)
