* Slower expansion in U.S. service sector dents optimism
* Poor U.S. retail sales also casts pall over market
* Euro rallies after upbeat assessment from ECB's Draghi
By Herbert Lash
NEW YORK, May 3 Global stocks and crude oil fell
on Thursday after a slower-than-expected expansion in the U.S.
economy's service sector and weak retail sales damped optimism a
day before a highly anticipated labor market report for April.
Stocks turned lower, government debt pared losses and the
U.S. dollar trimmed gains against the yen after the Institute
for Supply Management said its services sector index fell to
53.5 in April from 56.0 the month before.
The report missed economists' forecasts for a reading of
55.5, according to a Reuters survey. A reading above 50
indicates expansion in the sector.
"What's most concerning is the decline in the employment
component. That could point to a softer nonfarm payrolls report.
Economists expect a rise in payrolls, but other indicators point
to softer job growth," said Kathy Lien, research director at GFT
Forex in Jersey City, New Jersey:
"The bulls might be in for a bigger surprise than the
Wall Street moved lower on the ISM report after hovering
near break-even after the open.
The number of Americans filing new claims for jobless aid
fell more than expected last week, easing fears the U.S. labor
market recovery was stalling. Initial claims for state
unemployment benefits dropped 27,000 to a seasonally adjusted
365,000, the Labor Department said.
Weakness in retail sales data also weighed on U.S. stock
indexes. According to Thomson Reuters data, 52.9 percent of
retailers missed monthly same-store sales expectations for
April. Costco Wholesale Corp's April sales missed
estimates, sending shares down 2.2 percent to $84.71.
The Dow Jones industrial average was down 39.43
points, or 0.30 percent, at 13,229.14. The Standard & Poor's 500
Index was down 5.73 points, or 0.41 percent, at
1,396.58. The Nasdaq Composite Index was down 13.94
points, or 0.46 percent, at 3,045.91.
In Europe, the FTSEurofirst 300 index of top
regional shares retreated 0.2 percent to 1,041.62 points.
MSCI's all-country world equity index also
retreated, falling 0.4 percent to 327.11.
The euro rallied from two-week lows against the U.S. dollar
after European Central Bank chief Mario Draghi gave a more
upbeat assessment of the euro zone than expected, reducing
expectations of further monetary easing.
Draghi, in comments after the ECB kept rates unchanged at 1
percent, said the euro zone's economy was likely to recover this
year, although the outlook remained vulnerable to downside
risks. He added that inflation was likely to remain above 2
percent this year..
The euro was up 0.02 percent at $1.3158, while the
dollar index up 0.06 percent at 79.176.
Traders said investors holding short euro positions were
squeezed when Draghi disappointed their rate cut expectations by
not signaling further easing or outlining measures to boost what
many believe is still a struggling euro zone economy.
Oil slipped under $117 a barrel after OPEC said it had
opened the taps more to weaken prices.
Brent crude for June delivery fell $1.46 to $116.74
a barrel. U.S. crude futures fell $1.87 to $103.35 a
Government debt pared losses to trade near break-even.
The benchmark 10-year U.S. Treasury note was
flat in price, yielding 1.93 percent. The 30-year U.S. Treasury
bond was up 1/32 in price to yield 3.11 percent.