Buoyant US jobs increase for January boosts global stocks
Stocks jumped and the dollar climbed against the yen yesterday as a surge in US job creation fuelled optimism about the world's biggest economy, though uncertainty over a Greek debt restructuring deal kept the euro little changed.
The US created far more jobs than expected in January and the unemployment rate dropped to a near three-year low of 8.3pc, delivering a jolt of good news for the global economy and President Barack Obama's re-election prospects.
The US added 243,000 new jobs, higher than Wall Street expectations of about 140,000 and the strongest monthly figure since last spring.
The figures capped a week of positive indicators, leading economists to revise their view of the momentum in the global economy even as they remain concerned about the eurozone.
"There can be no doubts over the positive nature of this report," said David Sloan, economist at IFR Economics. "There is only one obvious significant caveat -- an unusually mild winter restricting the number of seasonal lay-offs, which are always heavy in January."
Investors welcomed the surge in payrolls, triggering a rally on Wall Street. The Nasdaq Composite Index hit an 11-year high and the S&P 500, the broadest stock measure in the US, extended its advance this year to almost 7pc. The index has already rebounded 21pc from a cyclical low in October.
"The year is off to a great start," said Chris Rupkey, senior US economist at Bank of Tokyo-Mitsubishi. "The expansion from the end of the 2007-09 recession is on track. It isn't going to go off the rails. In fact, activity is accelerating into the new year."
The jobs data also lowered expectations for more easing from the US federal reserve, with analysts saying a brightening economy could support fewer arguments for stimulus.
In addition, the pace of growth in the US services sector unexpectedly accelerated to its highest level in nearly a year.
"It's certainly supportive of the US recovery and suggests that (labour market) momentum is gathering pace," said Brian Dolan, chief market strategist at Forex.com in Bedminster, New Jersey.
"From a trading standpoint, it's positive for risk, but it also lowers the prospects for QE3, which is dollar-positive," he added, referring to the quantitative-easing programme.
With the US recovery showing signs of gaining momentum, analysts said the Federal Reserve could have less reason to step into markets with another round of quantitative easing to add liquidity. "The possibility of QE3 probably gets pushed back to the second half of the year," said Dolan.
Prices of US treasuries plunged after the data. The benchmark 10-year US treasury note was down 36/32, the yield at 1.947pc. (Reuters)