Volkswacht Bodensee - US, European stocks mixed as data comforts rate-cut bets

Equity markets surged last month as slowing inflation and a softer US job market stoked expectations that the Federal Reserve would early next year begin loosening monetary policy.

But stocks have struggled in recent days as investors and analysts worried that the bets on interest rate cuts may have gone too far.

Investors are looking to US payrolls data due out later this week for confirmation that the slowdown in the labour market and economy sought by the US Federal Reserve is taking hold, which would help bring down inflation further and allow policymakers to begin cutting interest rates.

"The markets are a touch nervous ahead of US jobs figures this week which could either reinforce or undermine the narrative that interest rates have peaked and rate cuts are on the way," said AJ Bell investment director Russ Mould.

"Signs the labour market is heating up again would put any hopes of a Santa rally into the end of the year under threat," he added.

But different US labour market figures released on Tuesday showed a monthly decline in job openings dropped in October to 8.7 million from 9.4 million in September.

The data "suggest that labour market slack is growing, even as payroll growth remains relatively resilient," said Olivia Cross at Capital Economics.

"With signs pointing to a sharper fall in wage growth ahead, the Fed can be reassured ahead of its meeting next week that inflationary pressures from the labour market are dissipating," she added.

In late morning trading the Dow dipped, while the S&P 500 was flat and the tech-heavy Nasdaq rose.

More than one percentage point of rate reductions through to next December have been priced in by futures traders, according to Bloomberg News.

But observers said the euphoria may have caused investors to get ahead of themselves and the next few weeks could be a little bumpy, while they remained broadly upbeat about the new year.

Morgan Stanley strategist Michael Wilson said in a note that this month could see "near-term volatility in both rates and equities" before positive seasonal trends and "January effect" provide a lift next month.

"The biggest near-term risk for the markets could simply be that after a phenomenal one-month rally, a period of consolidation may be a necessary breather," said UBS Global Wealth Management's Jason Draho.

A forecast-beating reading on Friday of key US payrolls data could jolt markets.

The Fed holds its next policy meeting next week with most watchers tipping it to stand pat on rates, though its statement will be parsed for any clues about plans for the next few months.

In Europe, Frankfurt's DAX 40 index hit a record high of 16,551.34 points during trading and then set a record close of 16,533.11 points as hopes of a rate cut by the ECB are also on the rise. Paris stocks also climbed.

London's FTSE 100 fell however, as mining stocks were pulled down by lower commodity prices.

The price of haven investment gold dropped slightly, after striking a record high on Monday at $2,135.39 per ounce as the dollar weakened on expectations for a rate cut.

Bitcoin on Tuesday reached $42,397.32, a fresh high since April last year, before pulling lower.

European gas prices hit the lowest level in nearly two months, bringing some relief amid cold weather.

After markets in Shanghai and Hong Kong closed, Moody's said it had downgraded its outlook on China's credit rating citing rising debt in the world's second-largest economy.

- Key figures around 1630 GMT -

New York - Dow: DOWN 0.3 percent at 36,112.40 points

London - FTSE 100: DOWN 0.3 percent at 7,489.84 (close)

Paris - CAC 40: UP 0.7 percent at 7,386.99 (close)

Frankfurt - DAX: UP 0.8 percent at 16,533.11 (close)

EURO STOXX 50: UP 0.6 percent at 4, (close)

Tokyo - Nikkei 225: DOWN 1.4 percent at 32,775.82 (close)

Hong Kong - Hang Seng Index: DOWN 1.9 percent at 16,327.86 (close)

Shanghai - Composite: DOWN 1.7 percent at 2,972.30 (close)

Euro/dollar: DOWN at $1.0795 from $1.0839 on Monday

Pound/dollar: DOWN at $1.2600 from $1.2632

Dollar/yen: DOWN at 147.17 yen from 147.19 yen

Euro/pound: DOWN at 85.67 pence from 85.77 pence

West Texas Intermediate: UP 0.6 percent at $73.46 per barrel

Brent North Sea crude: UP 0.5 percent at $78.39 per barrel

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