Equity markets continue new year retreat Friday 12.00 GMT Equity markets rebounded in Europe on Friday, but progress was slow as investors took profits from the most recent leg of the phenomenal rally seen in 2013. "Volumes are below average and the selling is more a function of profit-taking after some strong window dressing into year-end than anything fundamental," said Chris Weston at IG Markets. Craig Erlam at Alpari agreed: "This just appears to be a little bit of profit-taking after indices in the US ended 2013 at record highs." European stocks veered gently between small losses and narrow gains during morning trade. The FTSE Eurofirst 300 inched 0.4 per cent higher by midday, recovering from an earlier 0.2 per cent loss. Frankfurt's Xetra Dax climbed 0.3 per cent and London's FTSE 100 added 0.1 per cent. Early futures trading in New York suggested the markets would recover some of the losses of the previous session in opening trade. The S&P 500 dropped 0.9 per cent overnight. There was no clear catalyst beyond investors taking profits after the index ended last year at a record high, having climbed 29 per cent - its biggest annual gain since 1997. Hong Kong's Hang Seng index was the worst performer in the Asia-Pacific region, dropping 2.2 per cent. The Shanghai Composite lost 1.2 per cent and South Korea's Kospi Composite fell 1.1 per cent. China-based companies listed in Hong Kong performed the most poorly. The Hang Seng China Enterprises Index lost 2.6 per cent, pushing its one-month fall to 9.7 per cent. New data showed that the rate of growth in China's services sector dropped to their weakest point since August, consistent with the slowdown in the manufacturing sector seen earlier this week. The non-manufacturing purchasing managers" index, which fell from 56 in November to 54.6 in December, remains strongly in expansion territory, however, as any score above 50 indicates growth. Profit-taking was also evident in the currency markets, as the trades which were most successful in 2013 were partially unwound in thin trading conditions. Although markets in Tokyo remained closed, the dollar gave ground under the yen after climbing 22 per cent last year. The US currency fell 0.4 per cent to Y104.41. The Australian dollar, meanwhile, which fell nearly 15 per cent against the US dollar in 2013, climbed 1 per cent to $0.8991. Sterling climbed 0.1 per cent to $1.6466, but the euro fell 0.2 per cent against the dollar to $1.3641 as it continued its weak start to the year. Meanwhile, US government bond prices, reversed earlier gains, pushing the yield on the 10-year Treasury up 1 basis point to 2.99 per cent after the release of encouraging US factory data. The Institute for Supply Management's index of manufacturing activity edged back to 57 last month from November's two-and-a-half year high of 57.3. The data also offer encouragement for a decent payrolls number next week, which will help to support market expectations that the Federal Reserve will continue to taper its asset purchases at coming Federal Open Market Committee meetings. Gold remained the early 2014 star of the commodities market. After losing almost 30 per cent last year, the precious metal has put on 2.2 per cent in the first two trading sessions of the new year to $1.231.71 an ounce, after hitting a two-week high of $1,238.70.