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Strong US jobs data soothes financial markets

Strong US jobs data soothes financial markets

Strong, but not enough to impel the US Federal Reserve to cut back its stimulus scheme this year; that seemed to be financial markets' assessment of US jobs data that prompted share price gains across Europe. 

The US unemployment rate fell to a five year low of 7% in November, a steeper decline than expected from October's 7.3% reading. There was a 203,000 increase in payrolls, down slightly from October's 204,000, but also an expectation-beating figure.

Investors appeared to take the data in their stride, even as it could be seen as raising the odds that the Fed could 'taper' its stimulus scheme sooner than previously thought.

Britain's FTSE, already higher before the data, was trading up 0.7% at 6,545, while US stock futures pointed to a positive open. The dollar rallied against the Japanese yen, but failed to hold onto gains against the British pound and euro.

'This week’s data... add to the sense that the Fed will be itching to pull the trigger to take the first shot at killing off its huge $85bn per month asset purchase programme at its December meeting, at least to fire a warning shot that the time has come to start slowly bringing about some normalization of policy,' said Chris Williamson of data company Markit. 'However, the most likely outcome still looks like a deferment of any decisions until the new year.

FTSE snaps losing streak ahead of US jobs report (09:19)

The FTSE 100 ended a five-day losing streak, making small gains ahead of the US jobs data this afternoon that has kept investors on tenterhooks all week.

The UK’s blue chip index rose 0.4% to 6,522 in line with small rises across the rest of Europe as investors sought bargains after the longest stretch of daily declines since April.

Of big London movers, Berkeley Group (BKGH.L) shot up 8.7% to £24.81 after the housebuilder reported a 22% rise in half-year profits and announced an interim dividend of 90p per share. They were 'blow out' numbers, said Liberum analyst Charlie Campbell

Domino's Pizza (DOM.L) slumped 7.7% to 487p after the company announced that chief executive Lance Batchelor would leave next year. The news comes only months after shareholders found out that chief financial officer Lee Ginsberg is leaving the firm.

'Although there is no suggestion in the announcement that his exit is related to trading, his exit does not come at a good time,' said Nick Batram, an analyst at Peel Hunt, who is reconsidering his 'buy' recommendation on Domino's shares.

US jobs fixation

Most of the share price declines over the past few days can be attributed to the usual culprit: fears over the beginning of the end of US stimulus.

Most economists polled by both Reuters and Bloomberg don’t expect the Fed to start cutting back on the scale of its $85 billion a month shopping spree until March, although a move in December remains a possibility.

But a particularly strong jobs report this afternoon could change that consensus view.

Economists expect the unemployment rate to edge down from 7.3% to 7.2%.

They expect 180,000 new jobs to have been created in November, down from 204,000 in October.

No major economic data is due from the UK or Europe, after both the Bank of England and European Central Bank yesterday refrained from tinkering with their policy settings.

In the UK, a report from Halifax showed that house prices rose 1.1% in November. The pound was up 0.1% to $1.6354

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