* Dollar strengthens on strong U.S. services, factory
* European shares rise after encouraging earnings reports
* Wall Street pares declines after data
* Asia hit by unexpected weakness in China services PMI
(Adds close of European markets, quote)
By Chuck Mikolajczak
New York, Aug 5 The U.S. dollar strengthened and
bond yields rose on Tuesday after strong data on factory orders
and service-sector growth, while European shares posted a modest
gain to stem a recent declines.
But stocks on Wall Street were modestly weaker, although the
S&P 500 managed to hold above the 1,920 support level after
pulling back from recent highs last week, its largest weekly
drop in two years.
U.S. stocks started the session on a down note after weak
figures out of China, where the HSBC/Markit services PMI fell in
July to its lowest since November 2005, suggesting a recovery in
the world's second-largest economy may need further government
But the dollar hit its highest level since September 2013
against a basket of currencies after the Institute for
Supply Management said service-sector growth in the United
States hit an eight-and-a-half-year peak on strong growth in new
orders and employment.
Factory orders were also strong in July and data showed
positive revisions to durable goods orders, a sign that the
economy continues to improve. The euro fell to a day's low of
$1.3357 after the U.S. data, while the dollar hit a high
of 102.92 against the yen, continuing a trend of strength
in the U.S. currency.
"The big picture is we are still kind of hung over on the
good economic news from last week. That should propel markets
forward, but there will be volatility and noise in the interim,"
said James Liu, global market strategist at JPMorgan Funds in
"There is almost a sense of a gap between the economic
numbers right now and how the market has performed over the past
U.S. 10-year Treasury yields hit a session high
of 2.53 percent after the manufacturing and services data. The
benchmark 10-year note was down 3/32, to yield 2.50 percent.
The Dow Jones industrial average fell 67.14 points,
or 0.41 percent, at 16,502.14. The Standard & Poor's 500 Index
was down 8.89 points, or 0.46 percent, at 1,930.10. The
Nasdaq Composite Index was down 13.51 points, or 0.31
percent, at 4,370.38.
The MSCI All-World Index fell 0.5 percent.
European PMI figures showed the continent's economy was
growing, as expected. But manufacturing remained weak and kept
intact expectations the European Central Bank will ease monetary
policy further, pressuring the euro.
Investors in Europe were cheered by forecast-beating results
from German luxury carmaker BMW and France's third-biggest
listed bank, Credit Agricole, among others.
The pan-European FTSEurofirst 300 index of leading
shares gained 0.3 percent, a small recovery from its nearly 4
percent fall over the past two weeks on concerns over financial
uncertainty about Portugal's Banco Espirito Santo,
which was later bailed out.
In commodities markets, Brent crude slipped below
$105 a barrel, falling 96 cents to $104.45 as ample supplies
outweighed Middle East turmoil, while U.S. crude shed $1.08 to
(Reporting by Chuck Mikolajczak; Additional reporting by Daniel
Bases; Editing by Dan Grebler)