Friday July 3, 12:35 PM
TOPWRAP 2-Euro services dip affirms sombre economic mood
By Tom Bergin and Tomasz Janowski
LONDON/SINGAPORE, July 3 (Reuters) - Financial markets ended the week on a sober note after U.S. jobs data jolted sentiment about the potential for economic recovery.
Euro zone PMI data released on Friday reinforced a view created by bigger than expected U.S. job losses in June that the global economy is still struggling to pull out of recession.
European and Asian stocks fell, mainly on Thursday's U.S. jobs data, although markets were quiet because of the U.S. Independence Day holiday.
Government debt prices and the U.S. dollar rose, reflecting heightened risk aversion.
'Payrolls were a wake up call,' said Jacques Henry, analyst at Louis Capital Markets, in Paris. 'The data showed that the economic recovery remains fragile and more downbeat data is to be expected, particularly on the jobs front.'
The euro zone Services Purchasing Managers Index fell slightly in June to 44.7 from 44.8 in May, data provider Markit said on Friday.
A bigger-than-expected 0.4 percent month-on-month drop in euro zone retail sales in May added to concerns that the world's economy is not yet out of the woods.
BUSINESS SENTIMENT
The euro zone PMI data showed, however, that business sentiment improved in May. The business expectations index rose to 62.3 from May's 59.1, a level not seen since July 2007.
A level above 50 suggests the outlook is improving, while a level below 50 points to fears of contraction.
But it was unclear how well this business optimism would hold up in June given the harsher economic data.
Reviving consumer and business sentiment is a crucial part of international efforts to pull the economy out of financial crisis and nurse its strained banking system back into health.
Asia continued to lead the way in expecting stronger growth.
India's finance ministry said on Thursday that Asia's third-largest economy could see growth of around 7 percent this year and more in coming years if it made sweeping reforms.
China, the world's No.3 economy and its prime growth engine, aims for even faster growth of 8 percent this year with the help of its 4 trillion yuan ($585 billion) two-year spending programme and a surge in bank lending.
A newspaper report on Friday said Chinese banks were poised to lend a record 10 trillion yuan this year, double Beijing's minimum target, with first half loan growth already estimated to top 7 trillion.
(Reporting by Reuters bureaux; Editing by Myra MacDonald)
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