Markets take breather ahead of crucial US jobs data, as European crisis tensions ease

LONDON - Markets took a breather on Thursday, following solid gains in the previous session, as investors positioned themselves for crucial U.S. jobs data that often set the tone for a week or two after their release.

A recent run of solid U.S. economic news has reinforced hopes that Friday's nonfarm payrolls data will provide further evidence that the world's largest economy is over its soft patch from last summer.

The consensus in the markets is that the U.S. economy generated around 170,000 jobs during January. Though that is unspectacular for an economy recovering from its worst recession since World War II, the amount of jobs being created is up from levels seen just a few months ago.

The pick-up in the U.S. economic data, in general, has also helped support market sentiment at a time when there is a huge amount of uncertainty relating to Europe's debt crisis, despite more successful bond auctions Thursday from France and Spain.

"The fact that the U.S. is growing has been another source of relief," said Jane Foley, an analyst at Rabobank International. "A disappointing number tomorrow could spark a retrenchment in appetite for risk."

Weekly jobless claims figures later will be watched in the context of Friday's report for the month of January.

Ahead of that, markets were subdued, though a raft of earnings in Europe have helped maintain trading activity, as has confirmation that mining company Xstrata PLC is in merger discussions with commodities trader Glencore International PLC. A deal would create a company with revenues of around $175 billion and the news has helped both share prices rally in London.

Despite the Xstrata and Glencore's gains — of 10 per cent and 5 per cent — Britain's FTSE 100 index of leading shares was down 0.2 per cent at 5,781. Germany's DAX was 0.1 per cent higher at 6,623 and the CAC-40 in France was flat at 3,366.

The euro was also subdued after recent gains, trading 0.2 per cent lower at $1.3146.

Wall Street was poised for a flat opening, too — Dow futures were up 0.1 per cent at 12,662 while the broader Standard & Poor's 500 futures were flat at 1,320.

The focus on the U.S. over the rest of the week will have proved a welcome diversion for some traders from monitoring the daily grind of Europe's debt crisis, where much hinges on whether Greece can secure a deal with its private creditors, as is anticipated.

A deal is expected in a matter of days, according to officials, though that has been the official line for a few weeks.

"Given that it's Groundhog Day today its particularly apt that Greece continues to be the centre of continued speculation about what's happening with respect to the debt talks and the latest bailout," said Michael Hewson, markets analyst at CMC Markets.

"Even so markets are now so bored with it, any comments by EU officials are now being dismissed with a perfunctory shrug and an 'I'll believe it when I see it' attitude," Hewson added.

Earlier in Asia, Tokyo's Nikkei 225 rose 0.8 per cent to 8,876.82 while Hong Kong's Hang Seng shot up 2 per cent to 20,739.45 and Seoul's Kospi added 1.3 per cent to 1,984.30.

China's benchmark Shanghai Composite Index climbed 2 per cent to 2,312.56 on Thursday amid signs manufacturing improved in January for a second straight month.

Oil prices were subdued alongside other markets — benchmark oil for March delivery fell 51 cents to $97.10 per barrel Thursday in electronic trading on the New York Mercantile Exchange.

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Alex Kennedy in Singapore contributed to this report.