Market Features

Return to Article

World Markets Up Modestly Despite US Jobs Cheer

The Associated Press

LONDON (AP) — World stock markets rose modestly Friday even though better than expected U.S. jobs data stoked hopes that the world's largest economy may emerge from recession earlier than anticipated — a sign that further gains may prove more difficult than during the recent rally.

On Wall Street, the Dow Jones industrial average was up 27.27 points, or 0.3 percent, to 8,834.78 by midday New York time while the broader Standard & Poor's 500 futures fell 0.6 point, or 0.1 percent, to 941.86.

In Europe, Germany's DAX was up 12.23 points, or 0.2 percent, at 5,077.03 while France's CAC-40 index rose 27.02 points, or 0.8 percent, to 3,339.05.

Britain's FTSE 100 index was the big gainer in Europe, rising 51.62 points, or 1.2 percent, to 4,438.56 with miners in big demand after Rio Tinto PLC scrapped its $19.5 billion deal with China's Chinalco and opted instead to raise $15.2 billion in a share sale and set up a joint venture with rival BHP Billiton.

Though markets were up, many thought the gains would have been bigger after the Labor Department said the U.S. shed only 345,000 jobs in May. That was the fewest since September and well below market expectations for another 500,000 plus rise. A separate survey showing the unemployment rate rising to a 26-year high of 9.4 percent in May from 8.9 percent from April tempered some of the initial euphoria.

"Today's unemployment numbers have added further weight to the argument that the pace of the economic slowdown may well be easing, but as far as stock markets are concerned, it looks like a large chunk of these potential green shoots are already reflected in the price," said David Jones, chief market strategist at IG Index.

"If markets can't stage a sustainable rally on the back of such surprise good news, then it does look as though we may well have seen the best for share prices for a while," he added.

The rally in stock markets since mid-March, which has seen some of the world's major indexes in positive territory for 2009, has been fueled by a run of better than expected economic data, particularly out of the U.S. As stocks usually start rallying 6 to 9 months before actual recovery emerges in the official data, investors have bet that the massive sell-off in markets during the financial crisis was overdone.

During the stock market rally since March, the dollar has suffered as investors piled into riskier assets. The response to the payrolls figure was somewhat different as investors looked at the U.S. as the most likely place in the world to emerge first and strongest from the global economic downturn.

The dollar jumped to 98.24 yen after the payrolls data from 96.63 yen, while the euro fell to $1.3981 from $1.4190. The dollar had suffered in earlier stages of the stock market rally as investors piled into riskier assets.

Michael Woolfolk, senior currency strategist at the Bank of New York Mellon, said the rally in stocks over the last few weeks has "neatly dovetailed with economic cheerleading" by policymakers on both sides of the Atlantic emphasizing the "green shoots" of recovery.

"The net result has been real money coming off the sidelines, largely out of dollar-denominated deposits, into riskier assets such as equities, commodities and emerging markets," he said.

Woolfolk said Friday's gains for the dollar was more indicative of profit-taking than any change in the recent trend.

Meanwhile, the gains in Britain came despite mounting uncertainty surrounding the future of Prime Minister Gordon Brown another resignation from his Cabinet. James Purnell, who quit his position as works and pensions minister, called on Brown to quit to save the party from a mauling at the next general election.

So far, Brown has held firm and is currently attempting a restructuring of his government. Alistair Darling, the finance minister, has kept his job despite speculation earlier in the week that Brown wanted him out.

Earlier in Asia, Japan's Nikkei 225 stock average rose 99.05 points, or 1 percent, to an eight-month high of 9,768.01 while Hong Kong's benchmark Hang Seng closed up 1 percent to 18,679.53 in seesaw trade.

South Korea's Kospi took back its losses to add 1.2 percent to 1,394.71 but Shanghai's benchmark edged down 0.5 percent. In Australia, the main index advanced 0.9 percent.

Oil prices rose above $70 a barrel level, then eased, trading up 7 cents on the day at $68.88 a barrel. On Thursday the contract shot up $2.69.

____

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.