By Sinéad Carew and Marc Jones

NEW YORK/ LONDON (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.

(Reporting by Sinéad Carew, Karen Brettell, Marc JonesEditing by Ros Russell, Mark Potter, Peter Graff)

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