The dollar shined but equities mostly spun their wheels on both sides of the Atlantic Thursday as a hiring surge and drop in unemployment rekindled worries about a tightening of US monetary policy.
Data from payroll services firm ADP showed that private US firms added 978,000 jobs last month, far more than expected. Meanwhile, Labor Department data showed new claims for unemployment benefits last week fell below 400,000 for the first time since the pandemic.
But Wall Street's main stock indices fell on the news, although the Dow managed to break into positive territory in late morning trading.
"Stock futures have taken a nose dive after the US data as investors begin to worry about the possibility of tightening of the Fed’s monetary policy," Naeem Aslam, chief market analyst at Avatrade, wrote before trading began on Wall Street.
Traders have been worried that a strong economic recovery will fuel inflation and push the US Federal Reserve to reduce stimulus and raise interest rates much sooner than expected.
While Fed chief Jerome Powel has resisted the need to begin talking about "tapering" or winding down stimulus, other Fed leaders have begun to speak publicly about such a prospect.
Investors are now looking forward to the release of key non-farm payrolls numbers on Friday.
The NFP figures provide a key snapshot of the world's top economy, with expectations for a big jump as businesses restart and people return to some semblance of normality.
"Should the jobs report exceed market expectations, this is likely to boost confidence in the US economy and bring more Fed hawks into the picture," said FXTM analyst Lukman Otunuga.
But TDAmeritrade analyst JJ Kinahan said a quick shift by the Fed was unlikely given that Fed officials have "promised a long runway for the market to find out their plans."
Although it can't be ruled out, Kinahan said "It seems unlikely that the Fed would announce a taper at either the June or July Federal Open Market Committee (FOMC) meetings."
If the prospect of good US jobs figures leading to less stimulus and higher interest rates weighed on equities, it was a boon for the dollar, which rose against its major rivals.
In European trading, London's FTSE 100 index dropped by 0.6 percent, with travel and airline firms taking a hit after changes to Britain's travel list dimmed hopes for summer travel.
"More countries have moved to the red list and Portugal has been removed from the elect of ‘green’ countries, boosting uncertainty and increasing the reasons for investors to be cautious about holding on to" travel firm and airline stocks, said Chris Beauchamp, chief market analyst at online trading firm IG.
Paris shed 0.2 percent despite upbeat survey data that helped Frankfurt add 0.2 percent.
- Oil hits new highs -
Oil prices surged in Asian trading on growing optimism that the reopenings and vaccine rollouts will lead to resurgent energy demand.
Crude remains well supported by a decision Tuesday by OPEC and other key producers to only gradually lift output in response to the global recovery, while expectations for a return of Iranian crude have dimmed.
Brent peaked at $71.99 and WTI hit $69.40 in Asia before paring gains, though they remain close to multi-year highs and observers predict they could go even higher.
- Key figures around 1530 GMT -
New York - Dow: UP 0.2 percent at 34,657.18 points
EURO STOXX 50: DOWN less than 0.1 percent at 4,087.21
London - FTSE 100: DOWN 0.6 percent at 7,064.35 (close)
Frankfurt - DAX 30: UP 0.2 percent at 15,632.67 (close)
Paris - CAC 40: DOWN 0.2 percent at 6,507.92 (close)
Tokyo - Nikkei 225: UP 0.4 percent at 29,058.11 (close)
Hong Kong - Hang Seng Index: DOWN 1.1 percent at 28,966.03 (close)
Shanghai - Composite: DOWN 0.4 percent at 3,584.21 (close)
Euro/dollar: DOWN at $1.2128 from $1.2211 at 2100 GMT
Dollar/yen: UP at 110.24 yen from 109.64 yen
Pound/dollar: DOWN at $1.4108 from $1.4171
Euro/pound: DOWN at 85.97 pence from 86.18 pence
Brent North Sea crude: DOWN 0.5 percent at $71.01 per barrel
West Texas Intermediate: DOWN 0.4 percent at $68.58