Asset prices drifted sideways in Europe on Monday as a public holiday in the UK kept London closed and sucked liquidity from the region's markets. That exaggerated an upward blip in euro zone government bond yields as Italy prepared to auction 8.5 billion euros' worth of debt in various maturities later in the day, with the 10-year Bund yield gaining 2.4 bps to 4.09 percent.
It also put the brakes on a three-day winning streak for stocks as the pan-European FTSE Eurotop 300 index of blue chips eased 0.1 percent by mid-morning. The thin trade helped the dollar rise to 3-1/2 week highs against the euro early on Monday, breaking through $1.20 briefly before retreating as nervousness before Friday's U.S. jobs report tempered the gains, with traders worried about the risk of a repeat of disappointing reports in the previous two months. U.S. oil prices edged up as Iraq's oil exports continued at more than 30 percent below normal after sabotage attacks on pipelines, with light crude climbing 11 cents to $43.29 a barrel. News that French drug maker Sanofi-Aventis had had positive results in its experimental obesity drug lifted the stock but failed to inject dynamism into the broader European market which was trapped in a tight range, despite having rallied some five percent in the past two weeks. "For any move to be significant and sustained, it has to come with volumes and we have not seen that in the market in the past few weeks," said Gert-Jan Geels, asset manager at Eureffect in Amsterdam. The outcome of this week's U.S. jobs report could be crucial in determining whether the volume will return and whether the sentiment will be positive for stock investors and the dollar.
Analysts polled by reckon the U.S. economy generated 160,000 new jobs in August. "I think anywhere between 100,000 and 150,000 would not be such a bad result for the dollar. Anything under 100,000 and the dollar would be vulnerable to a sell-off, and above 150,000 would be a pretty clear buy signal," said Ko Haruki, head of institutional currency sales at HSBC in Tokyo. Bullish investors are looking for signs that the summer soft patch in U.S. economic data has passed and that oil prices will ease further from levels that -- despite dropping some $6 a barrel since peaking 10 days ago -- are high and risk cutting into corporate profits and economic growth. There was little for bulls to latch on to earlier in the day in Asia where key share indices were mostly softer on low volume and the dollar rose slightly against the yen . Only stock benchmarks in Hong Kong <.HSI> and Singapore <.STI> managed gains, both up 0.4 percent, while MSCI's broadest index of Asia-Pacific shares outside Japan <.MSCIAPJ> fell 0.4 percent and Tokyo's Nikkei 225 <.N225> fell 0.2 percent.
That was despite analyst forecasts that Tuesday's release of Japanese industrial production data for July would show a solid rise, and evidence that Japanese consumers are spending more freely after retail sales data for July showed a rise of 0.8 percent from a year earlier, more than the 0.5 percent expected.//