LONDON (AP) — Stock markets retreated Wednesday, fizzling out a day after solid U.S. economic data sparked a surprisingly buoyant start to the new year.
The U.S. economy, the world's largest, is likely to remain the focal point this week up through Friday's key jobs report for December, although ongoing worries over Europe's debt crisis will likely keep a lid on the enthusiasm.
So far this week, a positive outlook for the U.S. economy helped stocks post sizable gains. Germany's DAX was up around 5 percent in the first two trading days of the year, while the Dow Jones index in the U.S. closed Tuesday at its highest point in five months.
Wednesday saw a retreat following those sizable gains.
"Markets look to be getting a little reality check after an optimistic start to the week," said Carl Campus, an analyst at BMO Capital Markets.
In Europe, the DAX was down 0.6 percent Wednesday at 6,129 while the CAC-40 in France fell 1 percent at 3,213. The FTSE 100 index of leading British shares was 0.4 percent lower at 5,679. The euro was also down after solid gains Tuesday — 0.7 percent at $1.2956, but still up from last week's 15-month low of $1.2857.
In the U.S., the Dow Jones index was down 0.1 percent at 12,383 while the broader Standard & Poor's 500 index fell 0.3 percent to 1,273.
Barring any surprising developments in Europe's debt crisis, the focus will likely center on the U.S. and a raft of economic data that culminates Friday with the closely watched U.S. non-farm payroll figures for December.
A strong U.S. manufacturing survey, which showed the sector growing at its fastest rate in six months, has fueled hopes that the figures will be strong. The consensus in the markets is that the U.S. economy generated another 150,000 or so jobs during the month — a solid, if unspectacular, jobs creation.
"Markets have put to one side concerns about Europe so far this week," said Michael Hewson, markets analyst at CMC Markets.
Germany successfully auctioned euro4.06 billion ($5.28 billion) in 10-year bonds Wednesday despite concerns over the debt crisis that's afflicting the 17-nation eurozone. Demand for the bonds outstripped supply as investors placed bids for euro5.14 billion of the debt securities. The average interest yield was a low 1.93 percent, down from 1.98 percent in November.
Greece remains a key point of concern as it tries to negotiate a second massive financial bailout that involves private creditors being asked to forgive 50 percent of their Greek holdings. Many in the markets think that's not enough.
Greek Prime Minister Lucas Papademos was holding talks Wednesday with labor unions and trade federations ahead of a crucial visit by international debt inspectors. The meetings come a day after government spokesman Pantelis Kapsis warned that Greece might have to leave the eurozone if it fails to finalize the details of its second euro130 billion ($169 billion) bailout. He also said even more austerity measures may be needed.
Earlier, Asian stocks ended the day with gains, following a strong session on Wall Street.
Japan's Nikkei 225 showed renewed life as it posted a 1.2 percent gain to 8,560.11. The battered benchmark lost nearly 20 percent of its value in 2011 — a year marred by a tsunami and nuclear plant disaster, made all the more difficult by record-high levels for the yen.
Hong Kong's Hang Seng Index and South Korea's Kospi slipped after strong gains a day earlier. The Hang Seng fell 0.8 percent to 18,727.31, while the Kospi was down 0.5 percent at 1,866.22.
Oil prices gave up some of Tuesday's gains when they surged through the $100-a-barrel mark as equities advanced and tensions over the Persian Gulf between the U.S. and Iran escalated. Benchmark crude for February delivery fell 36 cents to $102.60 per barrel in electronic trading on the New York Mercantile Exchange.
Pamela Sampson in Bangkok contributed to this report.