European stocks edge up on upbeat services data

LONDON — European markets rose modestly Monday ahead of an expected solid start to the week on Wall Street and after upbeat survey data from the services sector helped offset the gloom from last week's worse than expected U.S. jobs data.

In Europe, the FTSE 100 index of leading British shares was up 5.22 points, or 0.1 percent, at 4,993.92 while Germany's DAX rose 16.87 points, or 0.3 percent, at 5,484.77. The CAC-40 in France was 8.06 points, or 0.2 percent, higher at 3,657.96.

Wall Street was also set to open higher later — Dow futures were up 44 points, or 0.5 percent, at 9,479 while the broader Standard & Poor's 500 futures rose 6.2 points, or 0.6 percent, at 1,027.90.

In Europe, sentiment was buoyed by surveys showing further improvements in the services sector despite further subdued retail sales data for the 16 countries that use the euro. The purchasing managers' index — a broad gauge of business sentiment — for the eurozone showed the services sector expanded in September for the first time in 16 months, while the equivalent British survey showed the rate of growth rising.

The reports helped reinforce expectations that both the eurozone and Britain likely emerged from recession in the third quarter, although analysts warned not to expect a strong rebound in growth, with another dip activity possible later in the year.

Most attention on Wall Street later will be on a similar survey on the U.S. from the Institute of Supply Management.

The consensus of economists' forecasts is for the main index to rise to 50 in September from August's 48.4. If it does rise to 50 then that would mean the U.S. services sector is no longer shrinking — 50 is the threshold between expansion and contraction.

"With ISM data expected to come in at 50 it could be a day of gradually clawing back some of the ground lost last week," said David Jones, chief market strategist at IG Index.

Last week, sentiment in the markets was jolted by the news that U.S. employers cut 263,000 jobs in September, way more than the 201,000 economists expected. Meanwhile, the unemployment rate increased to a 26-year high of 9.8 percent.

The news suggested companies were still relying on cost-cutting to eke out profits and consumers were still hurting and unlikely to boost their spending anytime soon. It also inspired extra caution ahead of third-quarter earnings reports this week that could shed more light on the U.S. economy's health.

"The risk of earnings disappointments cannot be ignored, and whatever the outcome, the season itself will lead to new questions over current valuations in equity markets globally," said UBS analyst Geoffrey Yu.

"With stocks almost 60 percent off their March lows, and signs of nervousness again coming to the fore last week, a deeper correction could be on the cards," he warned.

Currency markets are looking at the developments in stocks as many of the movements between exchange rates over the last few months have been predicated on how stocks have performed. The dollar, for example, has suffered as share prices have risen amid a rising appetite for risk. Conversely if shares now go into reverse, the dollar may start to benefit.

The dollar did move lower for a while after the Group of Seven finance ministers refrained from mentioning the currency in the communique that followed their meeting in Istanbul on Saturday.

"With the G-7 failing to come up with a strong statement on the dollar, the foreign exchange market remains stuck in recent trading ranges," said Neil Mackinnon, global macro strategist at VTB Capital in London.

By early afternoon London time, the euro was up 0.1 percent at $1.4610 but the dollar rose 0.5 percent to 89.87 yen.

Earlier in Asia, Japan's benchmark Nikkei 225 stock average lost 57.38 points, or 0.6 percent, to 9,674.49, sliding to an 11-week low.

In South Korea, the Kospi dropped 2.3 percent to 1,606.90. India's benchmark fell 1.1 percent, Australia's index was down 0.6 percent and Singapore's benchmark fell 0.5 percent.

Hong Kong's Hang Seng added 53.58, or 0.3 percent, to 20,429.07 after trading in the red for most of the day. Mainland China markets are closed for a weeklong holiday and reopen Friday.

Oil prices remained below $70, with benchmark crude for November delivery down 74 cents at $69.21. The contract fell 87 cents to settle at $69.95 on Friday.