London (AFP) – Stocks got only a modest and short-lived boost Friday despite the latest US jobs report helping solidify expectations of a pause in US interest rate hikes.
An increase of 187,000 jobs in August was slightly larger than analyst expectations, but the figures for the previous two months were revised significantly lower which, overall, indicated slowdown in the job market.
Moreover, wage growth slowed.
Briefing.com analyst Patrick O’Hare called it “a Goldilocks report as it pertains to the market’s thinking that the Fed won’t be raising rates again”.
A seperate survey showed the slump in US manufacturing activity continued for a 10th consecutive month in August amid ongoing softness in new orders.
Friday’s reports followed a series of data showing signs the world’s top economy is softening, and thus easing pressure on the Federal Reserve to lift interest rates further to fight high inflation.
“This would suggest we’ve probably seen the last of Fed rate hikes for this economic cycle, with the narrative now likely to shift to when we can expect the first rate cut,” said market analyst Michael Hewson at CMC Markets.
Wall Street’s main stock indices initially pushed strongly higher, but by late morning had given up much if not all of their gains, with the Dow up 0.2 percent.
The dollar fell against major rival currencies after the payroll data was released, but later swung higher.
– Frankfurt, Paris lower –
In Europe, both Frankfurt’s DAX stock index and the CAC40 in Paris closed lower.
“European automakers are acting as the largest drag with the DAX and CAC40 underperforming after UBS cut Volkswagen and Renault to sell, citing the impact of Chinese automakers when it comes to electric vehicles,” said CMC Markets’ Hewson.
Chinese automakers will have a major presence at the Munich car show opening next week, hoping to make serious inroads in the European auto market with their electric vehicles.
Investors were also assessing China’s latest moves to help the country’s battered property sector as authorities face growing calls to introduce a big-bang economic growth stimulus.
Chinese markets were lifted after the central bank cut the amount of foreign cash lenders must keep in reserve, in a bid to support the yuan.
Dealers also cheered the latest measures to help the property sector, which allow cities to cut down-payments for home buyers and encourage lenders to lower rates on existing mortgages.
The moves follow a series of pledges in August to shore up the industry, which is being ravaged by a gargantuan debt crisis.
Among them are rate cuts, lower rules for mortgage applicants, tax rebates for people upgrading their homes and a cap on commissions.
But observers say traders were unlikely to drag markets out of their slumber unless the government unleashes the sort of $550 billion “bazooka” seen in 2008 during the global financial crisis.
Data Thursday showed a massive plunge in sales in August, while developers are on the brink, with the biggest, Country Garden, close to default.
Oil prices rose strongly, with the main US contract hitting $85 per barrel for the first time since November thanks to a weaker dollar and supply concerns.
– Key figures around 1530 GMT –
New York – Dow: UP 0.2 percent at 34,774.27 points
London – FTSE 100: UP 0.3 percent at 7,464.54 (close)
Frankfurt – DAX: DOWN 0.7 percent at 15,840.34 (close)
Paris – CAC 40: DOWN 0.3 percent at 7,296.77 (close)
EURO STOXX 50: DOWN 0.3 percent at 4,282.64 (close)
Tokyo – Nikkei 225: UP 0.3 percent at 32,710.62 (close)
Shanghai – Composite: UP 0.4 percent at 3,133.25 (close)
Hong Kong – Hang Seng Index: Closed for typhoon
Euro/dollar: DOWN at $1.0793 from $1.0844 Thursday
Pound/dollar: DOWN at $1.2600 from $1.2669
Dollar/yen: UP at 146.17 yen from 145.49 yen
Euro/pound: UP at 85.64 pence from 85.56 pence
Brent North Sea crude: UP 1.3 percent at $87.94 per barrel
West Texas Intermediate: UP 1.4 percent at $84.78 per barrel
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