BETTER than expected job figures from America have boosted Wall Street, but cast a shadow over UK and European markets worried that it will accelerate the scaling back of key economic stimulus Stateside.
US employers added 175,000 jobs to their payrolls last month, the US labour department said – outstripping expectations for 149,000 new jobs after 129,000 positions had been created in January.
“This bodes well for the economy since there were massive headwinds against it and there had been some data before this indicating that it wouldn’t be so strong,” Adam Sarhan, chief executive at Sarhan Capital in New York, commented.
Sean McCarthy, regional chief investment officer with Arizona-based Wells Fargo Private Bank, said: “It was incredible, the market loves it, we were definitely braced for something lower.”
The unemployment rate, however, rose to 6.7 per cent from a five-year low of 6.6 per cent. The dollar hit a six-week high against the yen.
European economists said that the strong rise in US job creation would convince the Federal Reserve’s new chair, Janet Yellen, who took over from Ben Bernanke a few weeks ago, to keep reining in the Fed’s monetary stimulus programme.
The bond-buying, known as quantitative easing, has boosted worldwide stock markets over the past three years as it has been seen as aiding the recovery of America, the world’s biggest economy.
The jobs creation last month was seen as particularly impressive as it happened in the teeth of severe winter weather across the Atlantic that had disrupted economic activity.
Paul Dales, senior economist at Capital Economics in London, said: “If the [US)] economy managed to generate 175,000 new jobs in a month when the weather was so severe, once the weather returns to seasonal norms payrolls employment growth is likely to accelerate further.”
Most economists expect Yellen will announce further scaling back of stimulus at the central bank’s next meeting on 18-19 March.
“Fed tapering will likely continue full steam ahead,” said Craig Dismuke, chief economic strategist at Vining Sparks in Tennessee. The Fed is still providing $65 billion support to the US economy each month.
Immediately after the employment data, the Dow Jones industrial average and the broader-based S&P 500 rose and although both retreated from session highs, they still closed up, the Dow finishing 30.12 points, or 0.18 per cent, ahead at 16,452.01 . The tech-heavy Nasdaq index, though, fell.
Both the S&P 500 and Dow recorded a second consecutive week of gains, while, despite its dip, the Nasdaq saw its fifth week running of advances.
By contrast, on this side of the Atlantic markets were more jittery about the possible ramifications of the latest data, while concerns about the fraught political situation in Ukraine also weighed on sentiment. In London, the FTSE 100 blue-chip index was treading water close to its opening mark until the numbers were released, but closed 75.8 points lower at 6,712.7. Germany’s Dax index closed down 2.01 per cent and the Cac 40 in Paris shed 1.15 per cent.