A jobs sign is seen on the front of the US Chamber of Commerce building in Washington, DC. The US economy continued to add jobs in May at a moderate pace despite worries that the government’s sequester spending cuts would cause private businesses to slow hiring.
LONDON: European stock markets posted sharp gains yesterday as traders welcomed modest US job creation data.
After treading water earlier in the session, European equities advanced after the Labour Department announced that the US economy added 175,000 jobs in May, scotching worries that job creation had slumped in the spring but not likely so strong as to push the US Federal Reserve to begin tapering its monetary stimulus programme.
London’s FTSE 100 index of leading shares closed up 1.20 percent to 6,411.99 points, while in Frankfurt the DAX 30 index jumped 1.92 percent to 8,254.68 points and in Paris the CAC 40 climbed 1.53 percent to 3,872.59 points. Milan rose by 1.0 percent and Madrid added 0.61 percent.
Markets have been eagerly awaiting the May job creation numbers as an indicator of the strength of the recovery in the world’s top economy.
Fed chief Ben Bernanke indicated last month that the US central bank could soon begin cutting back on the amount of stimulus it injects into the economy by buying bonds and other assets in a programme known as quantitative easing but would not want to jeopardise the recovery.
Since then the markets have been looking at economic data through the prism of its impact on monetary policy.
The Fed has said it would shift policy if unemployment drops to 6.5 percent. Yesterday’s report showed unemployment inched up 0.1 percent to 7.6 percent. Wood said the US economy has coped well so far with mandated government spending cuts, but these could hit growth later in the year.
US stocks also advanced on the jobs data. In midday trade the Dow Jones Industrial Average was up 1.21 percent to 15,223.02 points, while the broad-based S&P 500 put on 1.04 percent to 1,639.40 points, and the tech-rich Nasdaq Composite Index added 0.97 percent to 3,457.10 points.
Back in Europe, the Bundesbank said that the economic outlook for Germany is brightening, as improved trade data suggested Europe’s biggest economy is slowly leaving its recent weakness behind it.
The Bundesbank predicted that German gross domestic product would expand by 0.3 percent in 2013 and 1.5 percent in 2014.
That represents a slight downward revision from the previous forecasts in December when the central bank had been pencilling in growth of 0.4 percent and 1.9 percent respectively.
In forex markets, the euro slid to $1.3225 from $1.3243 late in New York on Thursday. The dollar rose to 97.29 yen from 97.07 yen on Thursday. At the end of a torrid week for the greenback that has seen it lose about four percent against the yen, economists said the non-farm payrolls data would determine its near-term direction.
The current weakness of the US currency sent Tokyo stocks down again, with the Nikkei losing 0.21 percent to end at 12,877.53 points on Friday. On the London Bullion Market yesterday, the price of gold fell to $1,386 an ounce from $1,400 on Thursday. Investors were also awaiting a batch of Chinese economic data to be released tomorrow.
AFP
