LONDON (AP) -- Soft U.S. economic figures hit stocks and the dollar Wednesday ahead of key government jobs data at the end of the week. Japanese shares, however, outperformed all others as investors anticipated aggressive policy action from the Bank of Japan.
Investor sentiment, which was already fairly flat following a solid trading session on Tuesday, was dented by a soft private jobs report for the U.S. from payrolls processor ADP as well as a weaker-than-anticipated non-manufacturing survey from the Institute for Supply Management.
In Europe, the FTSE 100 index of leading British shares was down 1.03 percent at 6,423 while Germany's DAX fell 0.9 percent to 7,874. The CAC-40 in France was 1.3 percent lower at 3,754.
In the U.S., the Dow Jones industrial average was down 0.43 percent at 14,598 while the broader S&P 500 index fell 0.76 percent to 1,558.
The dollar was also on the retreat following the disappointing economic news. The euro was up 0.19 percent at $1.2843 while the dollar fell 0.47 percent to 92.93 yen.
The soft tone in markets gathered pace after ADP found that private employers added 158,000 jobs in March, way down on February's gain of 237,000 and expectations for a rise of about 200,000.
The survey came ahead of Friday's official nonfarm payrolls figures for March, an indicator that often sets the market tone for a week or two. This time the payrolls figures could have an even bigger bearing as investors try and work out when the Federal Reserve will start withdrawing its economic stimulus.
"Not that this is a good measure of the actual payroll report but the ADP will keep the bulls from boosting their payroll estimates between now and Friday," said Steven Ricchiuto, chief economist at Mizuho Securities.
A disappointing survey from the Institute for Supply Management fueled the prevailing caution too. Its main index of non-manufacturing activity fell to 54.4 last month from 56 in February. Though the sector continues to grow — any reading above 50 signals expansion — March's figure is the lowest in seven months.
Earlier, Japan was in focus as the country's central bank started its first policy meeting under a new governor committed to aggressive monetary action to end years of economic malaise. There are expectations that the bank will announce a big monetary stimulus at the end of its meeting on Thursday.
Bank of Japan chief Haruhiko Kuroda has vowed to do whatever it takes to get Japan out of its debilitating deflation. Kuroda, who assumed his post March 19, has pledged to cooperate with Prime Minister Shinzo Abe's program of big government spending, monetary easing and economic reforms aimed at improving Japan's competitiveness.
Optimism about the meeting's outcome sent the Nikkei 225 index in Tokyo soaring 3 percent to close at 12,362.20.
"The Nikkei is the standout, jumping 3 percent as the Bank of Japan's two-day monetary policy meeting kicked off, and the market is anticipating some bold stimulative action under new governor Kuroda," said Robert Kavcic, an analyst at BMO Capital Markets.
The Bank of Japan is not the only central bank announcing policy decisions Thursday. However, the European Central Bank and the Bank of England are not expected to alter policy.
Elsewhere in Asia, stock markets struggled despite the Nikkei's surge. Hong Kong's Hang Seng fell 0.1 percent to 22,337.49 while South Korea's Kospi shed 0.2 percent to 1,983.22.
Oil prices tracked most equity markets lower, with the benchmark New York rate down $1.88 at $95.32 a barrel.
Pamela Sampson in Bangkok contributed to this report.