World stock markets fall ahead of US jobs report

BANGKOK (AP) - World stock markets fell on Friday as investors stayed on the sidelines ahead of a key US jobs report later in the day.

Investors were also registering disappointment with the European Central Bank (ECB) after it failed to fulfil hopes for a dramatic step to spark economic activity in the recession-mired region. Confusion about which direction the US Federal Reserve might go with its bond-buying stimulus also kept investors edgy.

"I think market sentiment is still weak because there is still concern about what the next move of the Federal Reserve will be," said Mr Linus Yip, a strategist at First Shanghai Securities in Hong Kong.

London fell 0.2 per cent in early trading. Frankfurt rose 0.1 per cent, while Paris was marginally higher.

Fed chief Ben Bernanke has said the US central bank might pull back on its US$85 billion (S$105 billion) a month bond-buying programme if economic data, especially hiring, improves. However, other Fed officials have spoken about a winding down of asset purchases sooner.

Stock markets, which have been pushed up by investors looking for returns that outpace bonds, may feel the pinch if the Fed scales back purchases that have kept interest rates low.

Tokyo lost 0.2 per cent to close at 12,877.53 after the yen climbed against the US dollar. That pummelled Japan's exporters, which generally welcome a weaker currency to make products more competitive overseas.

Hong Kong fell 1.2 per cent to 21,571.01. Seoul lost 1.8 per cent to 1,923.85. Sydney shed 0.9 per cent to 4,737.7.

Later on Friday, the US Labour Department will release its employment report for last month. The report is closely watched for signs of improvement in hiring, critical for an economy trying to pick up the pace of a sluggish recovery. A recent batch of weak manufacturing reports has also heightened concerns about the economy's strength.

On Thursday, investors were disheartened by the lack of new initiatives from ECB president Mario Draghi that might help boost ailing European economies.

Even though the ECB cut its 2013 growth and inflation forecasts for the 17-country euro currency grouping, Mr Draghi said the governing council felt there was no reason to act now, especially as recent data suggested an improvement in the current gloomy economic conditions.

Analysts at Credit Agricole CIB in Hong Kong called the ECB's pronouncements "fairly disappointing for anyone looking for some signal of more easing to come".