European stock markets rallied after a forecast-busting update on the US labour market, only to sink back down again in an unstable end to a volatile week.
With one eye on developments in Ukraine investors sent the FTSE 100 down 0.5% to 6,754, roughly in line with losses across Europe. The UK's blue chip index is heading for its second consecutive weekly loss.
The US S&P 500 rose though, up 0.2%, after the closely-watched US labour market update showed 175,000 new jobs were added to the economy in February, against market expectations of a 149,000 rise.
January’s number was raised from 113,000 to 129,000.
Less positive though was a rise in the unemployment rate to 6.7% from 6.6%, while the three-month average in the rate of growth of non-farm payrolls was the weakest since July 2012.
Economists and investors use the figures to predict whether the US Federal Reserve will continue on its path of reducing its bond-buying stimulus scheme.
Chris Williamson, chief economist at data company Markit, said overall the data ‘adds weight to the belief that the Fed will continue to reduce its monthly asset purchases in $10 billion increments’.
James Knightley of ING Bank had a similar takeaway: ‘With more people in work and these workers earning more money it should be good news for consumer spending and confidence and help cement expectations for ongoing Fed asset purchase tapering.’
The stronger than expected data pushed the gold price lower, down 1.2% to $1,334 per ounce.
FTSE slumps towards weekly loss ahead of US jobs report (09:15)
European share markets pointed lower as investors prepared themselves for this afternoon’s crucial update on the US jobs market.
With no major companies scheduled to report financial updates, Britain’s FTSE 100 fell 0.3% to 6,766, heading towards a loss of some 40 points for the week.
Investors continue to gauge the situation in Ukraine, where US president Barack Obama has urged Russia's Vladimir Putin to seek a diplomatic solution, while news that China has suffered its first corporate bond default also dented the mood. A small Shanghai-based solar power company has defaulted on its interest payments, with concerns about wider ramifications, according to reports.
All eyes though are on US jobs data this afternoon. The unemployment rate is expected to remain steady at 6.6%, while the ‘non-farm payrolls’ report is expected to show that 150,000 jobs were added to the economy in February, after two successive months of disappointing outcomes.
‘A third consecutive month of weak payroll growth in February would raise speculation that the Fed will pause the tapering of its asset purchases,’ speculated Paul Dales of Capital Economics.
Jonathan Sudaria, a dealer at Capital Spreads, said traders were looking towards the figures optimistically: ‘If it’s a bad number, so what, the markets will probably shrug it off and blame it on the weather again as has been evidence by the amount of pundits already making apologies for it. If it’s a good number, well the ability to create jobs despite the weather must be a sign of underlying strength.’
In London, Aviva (AV.L) topped the FTSE 100, adding to Thursday’s gains after the insurer reported a 6% rise in operating profits for 2013 to £2 billion. Shares were up nearly 2% on Friday to 513p.
In currency markets the euro added to steep gains on Thursday after the European Central Bank confounded growing expectations for further policy action. The single currency was trading up 0.1% at $1.3875