Volkswacht Bodensee - Stock markets diverge as rally fades

Wall Street edged higher at the opening bell as private sector hiring and wage growth data came in softer than expected, while second quarter GDP growth was revised down to 2.1 percent on an annual measure.

"The equity futures market saw some uplift following the data, seemingly riding the theme that less good economic news is good news if it keeps the Fed on hold," said market analyst Patrick O'Hare at Briefing.com before the start of trading on Wall Street.

Federal Reserve chief Jerome Powell last week said last week the US central bank stands ready to hike interest rates further, having already pushed them to a two-decade high to tame prices, if data shows the economy continues to grow strongly and price pressures persist.

But this data-dependent approach was understood by markets as keeping open the possibility interest rates may not go any higher if data shows US economic growth moderating.

That set off strong gains at the beginning of the week, particularly after Tuesday's softer-than-expected JOLTS report on US job openings, which analysts said would give monetary policymakers room to hold off on lifting borrowing costs further.

The cooling of rate expectations helped bring US Treasury yields down and even allowed investors to bring forward bets on a rate cut to June from July, according to Bloomberg News.

"Signs of America's cooling economy have raised hopes that the pause button will be pushed on punishing interest rate hikes," noted Susannah Streeter, head of money and markets at Hargreaves Lansdown.

But with stocks having posted solid gains in recent days, the rally may be running out of steam.

"We suspect traders might be showing some hesitation, thinking that this heady action can't persist or, at least, opting to wait and see if it does," said O'Hare.

Moreover, more data is due out later this week: the Fed's preferred gauge of inflation -- the personal consumption expenditures price index -- as well as data on non-farm payrolls and factory activity.

In afternoon trading in Europe, London and Paris rose while Frankfurt fell.

Tokyo closed higher but Shanghai and Hong Kong flattened.

The dollar slid against its major rival currencies.

Oil prices climbed as crude-rich Gabon faced a military coup.

Focus was also on China after a report said its biggest state-backed banks would slash rates on mortgages and deposits as part of a drive to support the country's beleaguered property sector.

- Key figures around 1330 GMT -

New York - Dow: UP 0.2 percent at 34,922.67 points

London - FTSE 100: UP 0.3 percent at 7,490.09

Frankfurt - DAX: DOWN 0.2 percent at 15,904.69

Paris - CAC 40: FLAT at 7,373.99

EURO STOXX 50: DOWN 0.1 percent at 4,321.84

Tokyo - Nikkei 225: UP 0.3 percent at 32,333.46 (close)

Hong Kong - Hang Seng Index: FLAT at 18,482.86 (close)

Shanghai - Composite: FLAT at 3,137.14 (close)

Euro/dollar: UP at $1.0926 from $1.0884 on Tuesday

Pound/dollar: UP at $1.2714 from $1.2644

Dollar/yen: DOWN at 145.63 yen from 145.87 yen

Euro/pound: DOWN at 85.93 pence from 86.05 pence

Brent North Sea crude: UP 0.6 percent at $85.98 per barrel

West Texas Intermediate: UP 0.7 percent at $81.74 per barrel

burs-rl/gw

P.Anderson--BTB