A sharp slowdown in hiring in the US sent stocks slumping yesterday, but just briefly, as it raised concerns for the economic and interest rate outlook in the world’s top economy.
Wall Street stocks fell at the opening bell after following data showing the US economy added just 160,000 net new jobs in April, the lowest level this year, but the Dow had nearly recovered all the ground as midday approached.
European stocks also took a knock from the release of the nonfarm payroll data from the US Labour Department, but in the final minutes of trading values recovered.
London’s benchmark FTSE 100 index managed to finish with a small gain on 0.1% and Frankfurt’s DAX 30 index added 0.2%
But in Paris the CAC 40 lost 0.4% in value.
The jobs growth figure was well below expectations and pointed to the impact of the sharp slowdown of the US economy to a 0.5% growth rate in the first quarter of the year. Analysts had expected a modest slowdown from March to about new 207,000 jobs.
“US equities are lower in early action following a disappointing April nonfarm payroll report, which has the Street grappling with how the Fed will respond through monetary policy,” said analysts at brokerage Charles Schwab.
Meanwhile market analyst Patrick O’Hare said the report was “a real pickle for the Fed”.
The sour part of the report was the slowdown in job creation, but that was matched by the sweet news of a 0.3% increase in average hourly earnings.
“What isn’t too kosher for the market about that statistic is that it provides some rationale for a purportedly data-dependent Fed to raise the fed funds rate in June,” said O’Hare.
The dollar fell after the release of the data, indicating that currency traders initially saw less likelihood the Fed will move to increase interest rates at its next monetary policy meeting in June.
The euro rose to $1.1419 in late London trade, but was still down considerably from the eight-month high of $1.1616 it struck on Tuesday.
While lower interest rates and a weaker dollar are usually good for the stock market, investors have been troubled by slowing economic growth.
“Feeble economic data from China to Europe to the US has prompted the worst weekly slide in European stocks since mid-February,” said analyst Jasper Lawler at CMC Markets.
“Global economic and corporate earnings growth appears to have crested for the time being so current market valuations are being questioned.”
Confidence on trading floors has been sparse the past two weeks following disappointing data and announcements from China to the US that tore a hole in hopes the world economy was showing signs of recovery.
On Friday, Asian stock markets mostly fell as lingering worries over global growth sent traders running from higher-risk assets.
In London, the FTSE 100 up 0.1% to 6,125.70 points; Frankfurt - DAX 30 up 0.2% at 9,869.9 points and Paris - CAC 40 down 0.4% at 4,301.24 points at the close yesterday.