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Markets largely brush off weak US jobs report

January 10, 2014

LONDON (AP) — Weak U.S. jobs figures weighed only slightly on global stocks Friday, with the disappointment largely assuaged by hopes the Federal Reserve won’t reduce its monetary stimulus again in the near future. The dollar, however, suffered a big reverse.

The 74,000 increase in payrolls in December was the smallest since January 2011. The unemployment rate still fell, by 0.3 percentage points to 6.7 percent, but that was largely because people dropped out of the labor force.

Though the figures were disappointing for stock investors who had been counting on further U.S. economic strength, they likely mean the Fed will not reduce its stimulus any more than traders currently expect. The stimulus has been one of the major props to stocks over the past few years.

Neil MacKinnon, global macro strategist at VTB Capital, said the figures provide “some leeway for incoming Fed boss Janet Yellen to maintain existing policy settings, especially in providing dovish forward guidance on interest rates.”

At its December policy meeting, the Fed decided to reduce its financial asset purchases by $10 billion to $75 billion from this month partly because of improvements in the labor market. Unlike many other central banks around the world, employment levels are a key component of the Fed’s mandate.

Following the figures, stock markets in Europe closed slightly down on where they were before while the main Wall Street indexes fell modestly.

In Europe, the FTSE 100 index of leading British shares was up 0.7 percent at 6,739.94 while Germany’s DAX rose 0.6 percent to 9,473.24. The CAC-40 in France was 0.6 percent higher at 4,250.60.

In the U.S., the Dow Jones industrial average was down 0.3 percent at 16,393 while the broader S&P 500 index fell 0.2 percent to 1,834.

The dollar fared less well — currencies often bear the brunt of any knee-jerk response to economic indicators. The euro was 0.4 percent higher at $1.3663, around a cent up on where it was before the payrolls data. The dollar was 0.8 percent lower at 104.07 yen.

Earlier, in Asia, investors were spooked by a report showing a slowdown in China’s exports.

Japan’s Nikkei closed with a slight gain of 0.2 percent to 15,912.06 while Hong Kong’s Hang Seng rose by 0.3 percent to 22,846.25. South Korea’s Kospi dropped 0.4 percent to 1,938.54 and the Shanghai Composite Index shed 0.7 percent to 2,103.30. India’s Sensex rose by 0.3 percent to 20,783.99.

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