US and European stocks ended mostly flat and the dollar fell on Thursday after a report showing weakness in US manufacturing last month weighed on shares as investors eyed Friday’s monthly US jobs data, while oil prices tumbled.

The Institute for Supply Management said its index of national factory activity fell to 49.4 in August, below expectations of economists polled by Reuters for a dip to just 52.0. It was the first contraction in manufacturing since February.

Jobs report

The data hurt sentiment amid an already nervous investor environment ahead of Friday’s US employment report for August. Federal Reserve Vice Chair Stanley Fischer had said last week that the central bank would consider the jobs data when discussing when to next raise interest rates.

Employers are expected to have added 180,000 jobs in August, according to a Reuters poll of economists.

ISM data

The benchmark US S&P 500 fell as much as 0.7 per cent after the ISM data before stabilising. The tech-heavy Nasdaq rose, boosted by Charter Communications, which gained 4.5 per cent.

The weak US ISM data also stifled European shares. Stocks in the region had earlier climbed to two-week highs.

“The ISM data was, in a word, disappointing,” said Peter Kenny, senior market strategist at Global Markets Advisory Group in New York. “It has forced investors to reconsider the landscape, not go blindly into the narrative that spells out a certainty about interest rates being bumped up in September.”

Crude oil

Oil prices extended Wednesday’s declines, with the market focused for a second straight day on US government data showing a rise in US crude stocks in the latest week.

MSCI’s all-country world equity index was last up 0.8 point, or 0.19 per cent, at 417.41.

The Dow Jones industrial average ended up 18.42 points, or 0.1 per cent, at 18,419.3. The S&P 500 ended down 0.09 point, or flat, at 2,170.86. The Nasdaq Composite gained 13.99 points, or 0.27 per cent, at 5,227.21.

Europe’s broad FTSEurofirst 300 index closed down 0.08 per cent, at 1,351.17.

Brent crude settled down $1.44, or 3.07 per cent, at $45.45 a barrel. US crude settled down $1.54, or 3.45 per cent, at $43.16 a barrel.

Dollar index

The dollar index, which measures the greenback against a basket of six major currencies, pulled back from Wednesday’s more than three-week high of 96.255 and was last down 0.42 per cent at 95.620 after the ISM data cast doubts on the strength of the US economy.

US Treasury yields were little changed ahead of Friday’s U.S. jobs data. Benchmark 10-year yields were last at 1.570 per cent, compared with 1.568 per cent late on Wednesday.

“The scenario that the market is not ready for is for a strong number tomorrow and for the Fed to guide toward a rate hike in September,” said Subadra Rajappa, head of US rates strategy at Societe Generale.

The dollar’s weakness helped spot gold recover after touching a more than two-month low of $1,301.91 an ounce. US gold futures settled up 0.4 per cent at $1,317.10.