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Global Stocks, Oil Rally on US Job Strength, Europe Hopes

Friday, 03 August 2012 09:39 AM

World stocks rallied 2 percent, oil prices jumped and the euro surged on Friday on news U.S. employers increased hiring in July by the most in five months and optimism that Europe was closer to action on its debt crisis.

Investors took a second look at Thursday's statement by European Central Bank President Mario Draghi and concluded that help was on the way, even though it would take more time than many hoped.

"A lot of market participants began to rethink yesterday's ECB statement and look at it from a more positive perspective. Overall, a lot of investors thought, 'maybe it's not as bad as it originally sounded,'" said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

The U.S. jobs report showed stronger-than-expected hiring but also a rise in the unemployment rate to 8.3 percent, which keeps alive the hope of further support for the economy from the Federal Reserve.

The jobs data came at the end of a volatile week, packed with Fed and ECB policy meetings that disappointed those hoping for more aid for the U.S. economy and Europe's debt-stricken nations.

"The employment numbers came in better than anticipated, and that added some positive fuel to the fire," said Ted Weisberg, a floor trader with Seaport Securities in New York.

The euro rose as high as $1.2386 on Reuters data and was up 1.7 percent at $1.2385 at midafternoon in New York, on track for its best day since the end of June. The dollar gained 0.5 percent against the yen, to 78.58 yen, after hitting a two-week high of 78.77.

The ECB indicated on Thursday it may start buying government bonds again to reduce crippling borrowing costs for Spain and Italy, but Draghi hinted that any intervention would not come before September.

Spain inched closer to seeking a sovereign bailout on Friday, but Prime Minister Mariano Rajoy said he needed first to know the conditions as well as the form any European Union rescue would take.

The MSCI world equity index was up 2.0 percent, while European shares ended 2.5 percent higher.

On Wall Street, the Dow Jones Industrial Average gained 217.29 points, or 1.7%, to end at 13096.17. The Standard & Poor's 500 Index was up 25.99, or 1.9%, at 1390.99. The Nasdaq Composite Index jumped 58.13 points, or 2%, to 2967.90.

The Federal Reserve on Wednesday sent a stronger signal that a new round of major support could be on the way if the recovery did not pick up.

In the oil market, NYMEX September crude settled at $91.40 a barrel, jumping 4.9 percent, front-month crude's biggest one-day gain since June 29. The unexpectedly strong U.S. jobs growth in July sparked upbeat sentiment on the oil demand outlook.

Brent crude rose $3.04, or 2.87 percent, to settle at $108.94.

Gold also climbed, with spot gold up 0.9 percent at $1,604.10 an ounce.

U.S. Treasury prices weakened on the labor data. The benchmark 10-year U.S. Treasury note was down 30/32, the yield at 1.58 percent.

Other U.S. data showed the pace of growth in the vast U.S. services sector edged up in July as new orders gained traction, but employment fell to its lowest level in nearly a year.

© 2020 Thomson/Reuters. All rights reserved.

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Friday, 03 August 2012 09:39 AM
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