US jobs data lifts stocks, ECB comments keep euro down
A solid pace of US jobs growth pushed up Wall Street stocks futures and the dollar on Friday, adding to pressure on the euro from signs that the European Central Bank (ECB) is warming to the once-taboo idea of aggressive asset buying.
The March U.S. non-farm payrolls showed 192,000 jobs were added in March in major test of the argument that the economic weakness of January and February was due to bad weather and the recovery of the world's biggest economy was still on track.
Median forecasts had been for a rise of 200,000 in payrolls, though dealers in the run up to the numbers had been speculating about a number nearer 220,000.
"What the markets need more than anything at the moment is a resilient recovery," Mouhammed Choukeir, Chief Investment Officer at Kleinwort Benson, said.
"The only thing that will be hard for people to reconcile is the recent comments from (Fed chair) Janet Yellen that the recovery is not yet sustainable and that Fed policy needs to remain accommodative."
European shares stretched their gains to 0.4pc from around 0.15pc before the data as they eyed a ninth consecutive positive session .EU.
Attention was also on the euro and southern European bonds after Thursday's declaration from the ECB that it was now seriously considering the kind of aggressive asset buying employed by the United States, Japan and Britain.
The euro fell to a five-week low of $1.3680 as it headed for a third week of net losses against the dollar, while the government bonds of Greece, Spain, Italy, Ireland and Portugal all made ground.
"If deflation creates huge monetary stimulus that could be supportive of risk assets," Choukeir said. "But the ECB's one-size-fits-all policy makes it challenging to be bold."
The dollar index .DXY hit its highest since February 27, while U.S. government bond yields cut early dips to trade flat. The dollar also rose against the yen to 104.13, having topped 104 for the first time since January.
NOT NOW, BUT MAYBE SOMETIME
In Europe, the focus remained on what looks to be an increasing divergence between the ECB's policy outlook and those of the Federal Reserve and Bank of England.
Crucially, ECB head Mario Draghi declared on Thursday the bank's members were "unanimous" on using unconventional easing if needed. That marked a major change as some countries, notably Germany, have long opposed steps such as quantitative easing.
European bond yields fell as a result and even Greek 30-year bond yields slipped below 6 percent for the first time since the global financial crisis.
The relentless rally in Greek bonds seen over the past two years could be given a further leg up later on Friday, with ratings agency Moody's widely expected to lift at least the rating outlook of the euro zone's weakest member.
"There is talk among investors that the country could return to market as early as next week if Moody's do upgrade it," said a trader at a market maker in Greek government bonds, referring to Athens' plans to issue a €2bn five-year bond soon.