* U.S. stocks fall in tandem with euro
* European stocks hit 2-week closing high
* Treasuries rise in renewed bid for safe havens
(Recasts, updates with European market close)
By Jennifer Ablan
NEW YORK, June 3 (Reuters) - The euro dropped on Thursday,
dragging U.S. stocks lower, as skittish investors pulled back
from early rallies despite economic data that supported
expectations for a strong U.S. key jobs report.
U.S. Treasuries debt prices rose as stocks slid and
investors sought safe havens.
The selling pressure was also weighed after a Hungarian
official representing the new government gave a forecast for a
budget deficit that greatly exceeded the current deficit
target. Government officials said Hungary had a slim chance to
avoid a Greek-style debt crisis.
The euro fell below important technical levels against the
dollar, triggering declines in U.S. equity markets.
U.S. stocks were also dented as tepid May sales from
retailers curbed investor optimism ahead of what is expected to
be a solid government payrolls report on Friday.
Wall Street erased earlier highs as the S&P 500 nearly
pierced its key 200-day moving average and the euro <EUR=>
weakened against the dollar.
The S&P 500 and the euro have tracked each other very
closely over the last 30 days. The two have tended to move in
lock-step since they are barometers of investor appetite for
risk. Traders use the euro as a proxy for concerns about the
European debt crisis.
"The market seems to like it when the euro is stabilizing,
and that seems to be a key point," said Tim Ghriskey, chief
investment officer of Solaris Asset Management in Bedford
Hills, New York.
"There is still a high degree of caution in the markets
right now. Many people don't want to step up in front of the
jobs report," Ghriskey added.
On Friday, the critical May non-farm payrolls report is
due, with economists looking for 513,000 non-farm jobs being
added to the economy.
The price on U.S. 10-year government debt pared earlier
losses on Thursday, as Wall Street moved into negative
territory and revived safe-haven demand for bonds.
Benchmark 10-year Treasury notes <US10YT=RR> were up 1/32
in price while their yield, which moves inversely to price, was
last at 3.34 percent after hitting a two-week high of near 3.43
percent.
European markets, which closed ahead of the sell-off in the
euro, rose to a two-week closing high. Oil companies bounced,
helped by a surge in the price of crude and as growth in the
euro zone services sector boosted sentiment.
"It's a relief rally, a snapback, after these horrifying
days and weeks, with the Greek and European tragedy," said
Franz Wenzel, strategist at AXA Investment Managers in Paris.
"But we don't see any improvement, economically or
valuation-wise. We expect shares to trade in a range."
The pan-European FTSEurofirst 300 <> index of top
shares rose 1.39 percent to end the day provisionally at
1,017.50 points, the highest close since May 18. The index is
still down more than 8 percent from a mid-April peak, on
worries a debt crisis in the eurozone could derail economic
recovery.
The Dow Jones industrial average <> dropped 50.18
points, or 0.49 percent, to 10,199.36. The Standard & Poor's
500 Index <.SPX> shed 3.63 points, or 0.33 percent, to
1,094.75. The Nasdaq Composite Index <> gained 0.46
points, or 0.02 percent, to 2,281.53.
The S&P retail index <.RLX> slipped 0.5 percent as
retailers posted lackluster May same-store sales -- up 2.5
percent, on average, versus expectations of 2.6 percent
growth.
Other data showed the U.S. non-manufacturing sector grew
less than expected in May, even as it added workers for the
first time since December 2007.
For details on recent data, see []
and[].
Global stocks as measured by MSCI <.MIWD00000PUS> climbed
1.0 percent, having earlier reached highs last seen on May 19.
Earlier, Tokyo's Nikkei share average <> rose over
3.0 percent, posting its biggest one-day rise in six months.
Emerging markets stocks <.MSCIEF> rallied 1.7 percent,
according to an MSCI index.
YEN PRESSURED
The Japanese currency, already on a shaky footing with
political uncertainty in Japan weighing, fell across the board.
The dollar rose 0.22 percent versus the yen <JPY=> to 92.38.
"Financial market conditions have stabilized in the near
term. There's renewed risk-taking and that leads to a weaker
yen," said Lee Hardman, currency analyst at BTM-UFJ.
Also, with the market speculating that Japan's next prime
minister would take a tougher stance in fighting the yen's
strength, traders took this as an opportunity to trim long
positions in the currency.
Finance minister and candidate for ruling party head -- and
the premiership -- Naoto Kan surprised markets earlier this
year by saying he wanted the yen to weaken more and that most
businesses were in favor of a dollar/yen rate around 95 yen.
Against a basket of major currencies, the dollar <.DXY> was
up 0.29 percent. The euro <EUR=> was down 0.44 percent at
$1.2195.
Gold <XAU=> fell 0.58 percent, to $1,215.80, but U.S. crude
oil futures <CLc1> rose 0.07 percent, to $72.91 per barrel.
(Additional reporting by Richard Leong; Editing by Leslie
Adler)
