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FTSE rises as US jobs data miss forecast
by Gavin Lumsden on Sep 06, 2013 at 14:24
(Update) Stock markets perked up this afternoon after US jobs data fell short of expectations, raising the odds that the Federal Reserve may delay a reduction in the amount of stimulus it provides the US economy.
After drifting in the morning the FTSE 100 responded to the disappointing US nonfarm payrolls figures by jumping 0.5%, up 31 points to 6,564. Tullow Oil remained head of the leader board, extending its gain to 2.8% to £10.63 after striking oil in the Barents Sea (see earlier report below).
Europe followed suit with the FTSE Eurofirst 300 index eight points or 0.7% higher at 1,232. Markets in Spain and Italy raced 1.3% higher, with the Cac 40 index in France rising 0.8%.
Labor Department figures showed 169,000 jobs were created in the US last month, short of the 180,000 that economists had forecast but enough to reduce the unemployment rate to 7.3% from 7.4% in July. However, this achievement was undercut by other figures showing more Americans had given up the search for work.
Ben Bernanke, outgoing chairman of the US Federal Reserve, has made employment a key factor in his decision on whether to 'taper' the amount of asset purchases the central bank conducts to stimulate monetary activity.
Paul Ashworth, chief US economist at Capital Economics, said the report was a 'mixed bag' that could be used to argue for both immediate tapering or delaying the scaling back a month or two.
On balance, he believed the Fed would not delay. 'Overall, with other indicators like initial jobless claims pointing to a strengthening labour market and the activity surveys indicating a pick-up in economic growth, we still expect the Fed to go ahead with the taper later this month.'
FTSE dips as UK trade gap tilts debate over economy
12.10 update: Markets dipped as investors sat back ahead of an important US jobs report this afternoon and took note of weaker figures from the UK economy.
The FTSE 100 shed nine points or 0.1% to 6,523 and the pound edged lower to $1.5580 against the dollar as traders awaited the 1.30pm release of US non-farm payroll numbers.
Economists polled by Reuters are looking for 180,000 new jobs to have been added last month, up from 162,000 in July. The strength of the figures will influence the US Federal Reserve’s decision on when to trim back its economic stimulus and could have a powerful effect on markets.
European markets also drifted with the FTSE Eurofirst 300 index off a point at 1,222.7.
A widening in the UK’s goods and services deficit added to the cautious mood. In total the country imported £3.1 billion more than it exported in July, a disappointment after the deficit fell to £1.3 billion in June.
David Kern, chief economist of the British Chamber of Commerce, said a £9.9 billion deficit in goods had been only partly offset by a £6.8 billion surplus in services. He said the larger-than-expected shortfall was a reminder of the obstacles facing the UK as emerging markets went through a difficult period. 'Yet monthly figures can be erratic,' he added, 'and the underlying trend still shows a marked improvement from 2012. That said, more needs to be done to rebalance our economy towards net exports.'
Industrial output figures also disappointed, with zero growth last month. Economists had expected a 0.1% rise.
The sobering data follow a string of positive economic news this week which have encouraged many in the City to think the UK is growing faster than official figures suggest and that the Bank of England (BoE) risks a policy error of keeping interest rates low for too long.
Sasha Nugent, analyst at currency broker Caxton FX, said: 'The disappointing figures may actually remind the market that the UK still has some work to do. It does make you think whether the BoE’s position is more justified than we think.'
Yields on benchmark 10-year gilts dipped back below 3% as investors bought government bonds after yesterday's sell off. This relieves some of the pressure on Bank of England governor Mark Carney. His new policy of 'forward guidance' is aimed at keeping interest rates at their current low of 0.5% for another three years if necessary in response to what he says is a weak recovery after the financial crisis.
In a quiet day for company news, Tullow Oil (TLW.L) led the FTSE 100 after announcing a big discovery of oil in the Barents Sea. Shares in the Citywire Top Stock, held by the Tom Dobell managed M&G Recovery fund, rose 2.4% to £10.58. The shares have had a tough year, falling 16% after previously disappointing exploration news.
See our FTSE data pages for more of today's risers and fallers
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on Dec 10, 2013 at 12:57