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Stocks turn red after gaining earlier

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Dollar rises slightly against yen

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Treasury yields fall; oil prices rebound

(Updated prices at 11:14 a.m. ET/ 1514 GMT)

By Sinéad Carew and Marc Jones

NEW YORK/ LONDON, Sept 5 (Reuters) - MSCI's global

equities index edged down on Thursday as investors assessed weak

jobs data and steady services activity while oil prices bounced

back due to a possible delay to output increases and a decline

in U.S. inventories.

U.S. Treasury yields fell and interest rate sensitive

two-year yields reached a 15-month low after ADP's private

sector August jobs data showed fewer new jobs than anticipated.

The data showed U.S. private employers hired the fewest

workers in 3-1/2 years in August while July data was revised

lower, potentially hinting at a sharp labor market slowdown.

Investors are still waiting for Friday's non-farm

payroll report, which is watched closely as the biggest

indicator for how much the U.S. Federal Reserve might cut rates

this month.

While bets have increased to around 40% from 34% a week ago

that the Fed might kick-off its long-awaited easing cycle with a

half percentage point move this month, traders still see a

roughly 59% probability that the cut will just be a quarter of a

percentage point according to CME Group's FedWatch tool.

But Thomas Simons, senior U.S. economist at Jefferies in New

York said the ADP report showed a still solid labor market and

that "the market is pricing in way too much easing from the Fed,

whether that be in terms of pace or total number of cuts."

"When you look at slowing payroll growth, slowing job

openings, slowing claims and steady wage growth, that means that

the labor market has settled into a better balance that is a

good place for most workers," he said.

Meanwhile, U.S.

services sector activity

was steady in August with the Institute for Supply

Management's (ISM) non-manufacturing purchasing managers (PMI)

index at 51.5 last month compared to 51.4 in July.

While the services data appeared to encourage traders

earlier in the U.S. trading session, stock indexes lost steam as

investors appeared to turn their focus to Friday's data.

On

Wall Street

, at 11:14 a.m. the Dow Jones Industrial Average fell

278.91 points, or 0.67%, to 40,696.06, the S&P 500 lost

19.37 points, or 0.35%, to 5,500.70 and the Nasdaq Composite

gained 39.58 points, or 0.24%, to 17,123.87.

MSCI's gauge of stocks across the globe

fell 2.31 points, or 0.28%, to 812.74 while Europe's STOXX 600

index fell 0.38%.

In currencies, the dollar index, which measures

the greenback against a basket of currencies including the yen

and the euro, gained 0.03% to 101.29.

The euro was up 0.02% at $1.1084 while against

the Japanese yen, the dollar strengthened 0.11% to

143.89.

In Treasuries, the yield on benchmark U.S. 10-year notes

fell 0.9 basis points to 3.759%, from 3.768% late on

Wednesday, while the 2-year note yield, which

typically moves in step with interest rate expectations, fell

0.2 basis points to 3.7683%.

A closely watched part of the U.S. Treasury yield curve

measuring the gap between yields on two- and 10-year Treasury

notes, seen as an indicator of economic

expectations, was at a negative 1.3 basis points.

In energy markets, oil rose from multi-month lows, due to a

possible delay to output increases by OPEC+ producers and a

decline in U.S. inventories, though gains were capped by

persistent demand concerns.

U.S. crude gained 1.53% to $70.26 a barrel and

Brent rose to $73.71 per barrel, up 1.39% on the day.

Gold prices touched their highest levels since Aug 30 after

the data showed the labor market losing steam.

Spot gold added 0.52% to $2,507.28 an ounce. U.S.

gold futures gained 0.57% to $2,507.60 an ounce.