Stocks higher on jobs surge

LONDON:

European and US stock markets advanced yesterday on data showing a surge in new job creation in the United States last month, but the dollar slumped as it didn’t boost the case for a quick hike in interest rates. With hiring up in retail, construction and the financial sector, the US economy added 227,000 net new nonfarm jobs in January, the biggest jump since September.

However, analysts said the data was mixed overall as the unemployment rate crept up by a tenth of a percentage point to 4.8 percent and wage growth stalled. While the job creation rate was considerably higher than the average in recent months, “the bad news was that wage growth was virtually non-existent and the unemployment rate was higher than thought,” said Neil Wilson, senior market advisor at ETX Capital. “All in all, it was a mixed bag and the rather whippy dollar price action reflected the uncertainty with which the markets are treating this,” he said.

The dollar quickly lost gains that it had made against the euro before the announcement of the jobs report, with the single European currency trading at roughly $1.0760. “It’s a report that will do nothing to make the Fed raise rates quicker, despite the strong-than-expected headline number” of jobs created, said Wilson. The US Federal Reserve on Wednesday kept its benchmark interest rate unchanged and said it still expects to need only gradual rate increases.

The Fed last month adopted only its second interest rate hike in a decade - putting the target range for the overnight lending rate at 0.5 percent to 0.75 percent. And it indicated it expected to implement three interest rate increases this year. “January’s employment report won’t convince the Fed to hike rates again just yet,” said US economist Andrew Hunter at Capital Economics. “We still expect the next rate hike to come in June.” Higher interest rates would support a stronger dollar as overseas investors would want to buy US bonds.

However, investors in stocks were happy with jobs numbers which largely confirm the health of the US economy, which has seen a slow but steady recovery from the 2008 financial crisis. US stocks moved higher at the opening bell, with the Dow moving back above the 20,000 points level. Meanwhile in Europe, London’s benchmark FTSE 100 index was up 0.8 percent compared with the close on Thursday. In the eurozone, Frankfurt’s DAX 30 grew 0.3 percent and the Paris CAC 40 climbed 1.0 percent. Asian traders moved cautiously ahead of the US jobs figures, at the end of a volatile week and following another tepid lead from Wall Street.

Tokyo’s main stocks index ended flat yesterday having swung in and out of positive territory owing to fluctuations in the yen, while Hong Kong slipped 0.2 percent. Shanghai closed down 0.6 percent as investors returned from China’s week-long New Year break unimpressed by data showing factory activity in the world’s number two economy had stabilized. Markets have struggled to find stability over the past five days following US President Donald Trump’s controversial ban on travellers from seven Muslim-majority countries and claims that China and Japan were currency manipulators. — AFP