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Global Stock Market Advance Capped by US Jobs Data

Thursday, 13 May 2010 12:07 PM

 

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European stocks rose Thursday though fairly disappointing U.S. jobs data erased some of the relief at the EU's $1 trillion financial rescue package from earlier this week. Wall Street was barely lower.

In Europe, Britain's FTSE 100 index of leading shares closed up 50.28 points, or 0.9 percent, at 5,433.73 while Germany's DAX rose 68.48 points, or 1.1 percent, to 6,251.97. The CAC-40 in France ended 2.33 points, or 0.1 percent, lower at 3,731.54.

On Wall Street, the Dow Jones industrial average was down 8.46 points, or 0.1 percent, at 10,888.45 around midday New York time while the broader Standard & Poor's 500 index fell 2.14 points, or 0.2 percent, at 1,169.53.

U.S. stocks had been expected to open modestly lower after solid gains on Wednesday and news that weekly jobless claims failed to fall as much as expected did nothing to alter those expectations.

The Labor Department revealed that first-time claims for jobless benefits dipped to 444,000 last week from an upwardly revised 448,000 the previous week — the consensus in the markets was for a drop to 440,000.

While a fourth straight weekly drop in claims is a positive sign, claims have not dropped far enough yet to signal sustainable job growth. Economists estimate weekly initial claims need to fall below 425,000 to show employers are consistently adding new workers.

High unemployment remains a primary obstacle to a strong recovery. The unemployment rate jumped to 9.9 percent last month, even though employers added 290,000 jobs. Investors will want to see consistent monthly job growth and weekly drops in claims to become more confident that the labor market is significantly improving.

"After the drama of last week, investors still haven't seemed quite able to pick a direction and run with it, with some variable economic data adding to the uncertainty," said David Jones, chief market strategist at IG Index.

Overall though, sentiment in the markets remains fairly steady, especially when compared with last week's dramatic volatility. Markets have been buoyed by the EU's $1 trillion bailout and a pledge by eurozone countries to strengthen their stability and growth rules. In Spain, Prime Minister Jose Luis Rodriguez Zapatero outlined where his new spending cuts would be made to get the country's deficit down faster.

However, the government debt crisis has not gone away overnight and investors will be keeping a close eye on developments over the coming weeks and months.

"Debt restructuring, debt default and debt monetisation are set to remain the main themes for financial markets in the longer term," said Neil Mackinnon, global macro strategist at VTB Capital.

Though confidence in stocks has been shored up somewhat by the package, the euro currency is now back more or less to where it was before the official announcement early Monday morning.

By late afternoon London time, the euro was down 0.4 percent at $1.2581. Before rumors of the deal swept the markets late last Friday, the euro was trading at a 14-month low around the $1.25 mark. Confirmation of the deal sent it flying back above $1.30 for a brief while on Monday.

"The initiative has reduced the likelihood of the worst case scenarios for Europe panning out, the threat of sovereign implosion or euro break-up substantially diminished, but the resultant market shift from euro attrition to euro apathy has simply changed the pace of decline," said Daragh Maher, deputy head of global foreign exchange strategy at Credit Agricole.

Earlier in Asia, Japan's benchmark Nikkei 225 stock average rose 2.2 percent to 10,620.55 with improving corporate earnings also boosting sentiment in Tokyo.

China's benchmark index in Shanghai jumped 2.1 percent as analysts predicted government measures to cool soaring property prices won't undermine the banking system. Citigroup said residential real estate values will likely drop up to 25 percent from recent peaks, but that shouldn't have much impact on bank mortgages or loans to developers.

South Korea's Kospi gained 1.9 percent to 1,694.58 and Hong Kong's Hang Seng added 1 percent to 20,442.46. Australia's S&P/ASX 200 index was advanced 1.8 percent at 4,652.80 and benchmarks in Taiwan, India and Indonesia also climbed.

Benchmark crude for June delivery was down $1.60 at $74.05 in electronic trading on the New York Mercantile Exchange, extending the previous day's big drop after the International Energy Agency said global oil demand is expected to rise less than previously expected in 2010.

——

Associated Press Writer Alex Kennedy in Singapore contributed to this report.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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