Portugal Colonial - Stocks slip as robust US jobs data stokes rate hike chances

Fed chairman Kevin Warsh made clear last week he saw rising prices as the main threat to the world's biggest economy, leading many investors to pencil in a rate hike at the central bank's September 16 meeting.

Key inflation data next week will reveal if those expectations prove correct, but the two-year US Treasury note -- which best reflects near-term rate expectations -- saw its yield jump after the jobs report, and the dollar rose.

"The employment report was a bit of a shocker," said Patrick O'Hare, a strategist at Briefing.com, especially after an alarmingly weak report in July.

"The good news on nonfarm payrolls, though, was quickly interpreted as bad news for monetary policy," he added, weighing on equities as traders consolidated positions ahead of the long Labor Day weekend in the US.

Wall Street indices opened flat to lower, mirroring the muted performance on European markets after an earlier rally in Asia.

Further stoking inflation worries was a record high for diesel prices to $5.85 a gallon in the United States, well above the levels before the US and Israel launched airstrikes against Iran six months ago.

Oil prices eased back after surging this week on renewed fighting between the warring sides, further dimming the prospects for a full opening of the Strait of Hormuz to tanker traffic.

Expectations that rising prices will force central banks worldwide to raise rates have sent government bond yields soaring.

"In the Fed's eyes, the labour market is holding up, which means inflation remains the bigger problem," said Bret Kenwell, US investment analyst at eToro.

On the corporate front, shares in Volkswagen surged more than eight percent, lifting the DAX 30 index, after the German car giant said management and unions had agreed to cut a total of 100,000 jobs by the end of the decade.

Hit by US tariffs, patchy demand for electric cars and above all fierce competition in and from China, Europe's largest carmaker has been struggling for years.

The job cuts amount to about 15 percent of Volkswagen's global workforce.

- Key figures at around 1345 GMT -

New York - Dow: DOWN 0.3 percent at 53,542.03 points

New York - S&P 500: DOWN 0.1 percent at 7,736.83

New York - Nasdaq: FLAT at 26,585.97

London - FTSE 100: DOWN 0.2 percent at 10,812.98

Paris - CAC 40: DOWN 0.1 percent at 8,278.72

Frankfurt - DAX: UP 0.6 percent at 26,146.93

Tokyo - Nikkei 225: UP 1.3 percent at 65,020.94 (close)

Hong Kong - Hang Seng Index: UP 1.7 percent at 25,650.87 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,930.12 (close)

Euro/dollar: DOWN at $1.1613 from $1.1628 on Thursday

Pound/dollar: UP at $1.3512 from $1.3527

Euro/pound: DOWN at 85.96 pence from 85.96 pence

Dollar/yen: UP at 155.68 yen from 155.74 yen

Brent North Sea Crude: DOWN 1.3 percent at $94.27 per barrel

West Texas Intermediate: DOWN 1.5 percent at $89.89 per barrel

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X.Brito--PC