06/11/2010
Stocks, dollar get boost after upbeat US jobs data
Better than expected US jobs data supported stocks Friday following massive gains a day earlier in the wake of the Federal Reserve’s decision to pump $600 billion in newly-created money into the economy.
The dollar surged after the forecast-busting jobs figures.
In Europe, the FTSE 100 index of leading British shares was up 3.30 points, or 0.1 percent, at 5,866.18, a day after it had closed at its highest level since June 2008, while France’s CAC-40 rose 9.04 points, or 0.2 percent, at 3,925.82. Germany’s DAX was 16.03 points, or 0.2 percent, higher at 6,750.72, a day after it joined the FTSE to close at a 28 month high.
In the US, the Dow Jones industrial average was down 11.20 points, or 0.1 percent, at 11,423.64 soon after the open while the broader Standard and amp; Poor’s 500 index was up a little less than a point at 1,221.85.
On Thursday, the Dow closed at its highest level since just before US investment bank Lehman Brothers collapsed in September 2008 and the S and amp;P hit a 2010 high.
Europe’s main markets and Wall Street futures had been trading lower before the Labor Department reported that the US economy generated 151,000 jobs in October, way more than the 60,000 consensus in the markets, while private payrolls rose 159,000, double market expectations. Further good news came with major upward revisions to previous months’ data.
Despite the jobs growth, the enthusiasm was tempered by the news that the unemployment rate remained at 9.6 percent.
“While today’s data is positive news, a sustained run of strong job creation will be needed to tackle the high level of unemployment in the US,” said Owen Jones, an economist at the Center for Economic and Business Research.
“It will require stronger growth than this over a sustained period of time before the Fed starts to think about tightening policy,” he added.
The rate-setting Federal Open Market Committee (FOMC) has indicated it will be monitoring economic data to see if it needs to buy up as many assets as it indicated.
The dollar has been weighed down in recent weeks by expectations the Fed will be ploughing more dollars into the financial system. However, if the US data continues to beat expectations and points to stronger than anticipated growth, then the Fed has suggested it may not need to buy the full $600 billion of assets over the next eight months.
By mid afternoon London time, the euro was 1 percent lower at $1.4076. As well as the US jobs improvement, Europe’s single currency has been pressured by an unexpected decline in eurozone retail sales in September as well as ongoing concerns about the debt situation in Ireland and Greece.
The Fed’s decision to back another round of so-called quantitative easing has generated a lot of talk around the world, not all of it welcoming.
China’s central bank chief Zhou Xiaochuan said the Fed’s move might hurt the rest of the world.
“If the domestic policy is optimal policy for the United States alone, but at the same time it is not an optimal policy for he world, it may bring a lot of negative impact to the world. There is a spill over,” Zhou said.
That sentiment was echoed by Germany’s finance minister Wolfgang Schaeuble, who said Thursday that the Fed’s stance is “creating extra problems for the world.” Earlier, Asian shares had advanced in the wake of Thursday’s rally in the US and Europe.
Japan’s benchmark Nikkei 225 stock index soared 267.21 points, or 2.9 percent, to 9,625.99 and Australia’s S and amp;P/ASX 200 added 1.2 percent to 4,800.60. Hong Kong’s Hang Seng index climbed 1.4 percent to 24,876.82 and China’s Shanghai Composite Index rose 1.4 percent to 3,129.50.
The Fed’s move continues to boost the prices of commodities like oil since expectations the Fed would increase the money supply have weakened the dollar, which is the currency most commodities are traded in. A weaker dollar makes commodities more attractive to investors holding other currencies.
Benchmark crude for December delivery was down 3 cents at $86.46 a barrel in electronic trading on the New York Mercantile Exchange after earlier reaching $87.22.
