Stocks hit by euro jobless rise, Fed uncertainty

FRANKFURT, Germany Ongoing uncertainty over how long the U.S. Federal Reserve will continue with its stimulus policies and more grim European jobs news weighed on markets Friday.

Eurostat, the EU's statistics office, said Friday that unemployment across the 17 European Union countries that use the euro rose to 12.2 percent in April. That's the highest level since the shared currency was introduced in 1999 and up from the previous record of 12.1 percent the month before.

"On the whole this portrays a region which continues to worsen and is unlikely to improve anytime soon," said Craig Erlam, market analyst at Alpari.

Following the figures, Germany's DAX was down 0.6 percent at 8,347 while France's CAC-40 declined the same rate to 3,953.12. Britain's FTSE 100 fell 0.9 percent to 6,600.

Wall Street also appeared headed for losses. Dow futures pointed down by 0.6 percent to 15,225. The S&P 500 futures dropped 0.7 percent to 1,642.30.

The dour European jobs figures came on top of lackluster U.S. economic reports Thursday that raised expectations the Fed will stick to its aggressive stimulus policies. The surprise rise in weekly jobless claims and a reduction in first-quarter growth helped shore up sentiment on Wall Street as they reined in expectations that the Fed will start to reduce government bond purchases, which are designed to support the U.S. economy.

The Fed's $85 billion-a-month purchases are aimed at keeping interest rates low to spur borrowing and investment. The efforts have pumped newly created cash into the financial system and boosted stock markets, where investors have turned for returns beyond what bonds are paying.

Over the past couple of weeks markets have been volatile in response to the vagaries of the U.S. economic data. Given the focus on the Fed at the moment in financial markets, investors will be closely monitoring the economic data that comes out of the U.S. Later the University of Michigan's latest consumer confidence survey will likely garner the most interest.

The figures later could also impact on the dollar as it heads towards the weekend. On Friday, the currency was having a mixed day, with the euro down 0.4 percent at $1.2987, but the dollar 0.5 percent lower at 100.39 yen.

Earlier in Asia, Japan's Nikkei 225 closed 1.4 percent higher at 13,774.54, bouncing back after a dizzying drop of more than 5 percent the previous day. South Korea's Kospi advanced 0.1 percent to 2,001.05. Hong Kong's Hang Seng fell 0.4 percent to 22,392.16.

Traders around the world are also keeping an eye on China. Its official manufacturing index for May is to be released on Saturday. A similar survey by HSBC Corp. issued last Thursday showed China's manufacturing contracted to a seven-month low of 49.6 from April's 50.4 on a 100-point index. Numbers below 50 show a contraction.

Andrew Sullivan of Kim Eng Securities in Hong Kong said traders were keeping their expectations in check for China, since as a huge exporter it is sensitive to global economic weakness.

"As long as it's not far off the 50 mark, I don't think people will be too worried," Sullivan said of the China manufacturing index.

Oil prices tracked equities lower with the benchmark New York rate down 46 cents to $93.15 per barrel.