World stocks rebounded yesterday after the US added more jobs than economists had expected last month, putting a halt to one of the worst selloffs since the height of the 2008 financial crisis.
The monthly US jobs data, which often set the market tone in markets for a week or two after their release, were keenly awaited after Thursday’s rout, when stocks suffered one of their worst days since the collapse of US investment bank Lehman Brothers in 2008.
In the run-up to the release, there were fears that the figures may have added to growing market fears that the world’s largest economy was heading back into recession.
However, their release has assuaged those fears somewhat, though not necessarily eased worries of the pace of the US recovery.
The US government reported that about 117,000 jobs were added last month and that the unemployment rate inched down to 9.1 percent from 9.2 percent in June. Neither of these numbers showed an economy in full bloom, but compared better with a dismal job market in June and expectations of 85,000 new jobs.
Almost immediately, Wall Street futures turned around, helping ease the pressure on European markets, which have been additionally weighed down by worries over the debt situation in Italy and France.
“The headline surprise, compounded by upward revisions and an unexpected drop in the unemployment rate help to diffuse some of the severe pessimism over the outlook for the US economy that has set in over the past two weeks,” Bank of New York Mellon analyst Michael Woolfolk said.
US stocks rose on the opening yesterday, with the Dow Jones industrial average up 160.26 points, or 1.41 percent, at 11,543.94. The Standard & Poor’s 500 Index was up 18.04 points, or 1.5 percent, at 1,218.11, and the NASDAQ was up 35.25 points, or 1.38 percent, at 2,591.64.
In Europe, France’s CAC-40 gained 1.3 percent to 3,363, while markets in the UK and Germany retraced some of their morning losses. The FTSE 100 was down 0.9 percent at 5,345 and the DAX was 0.8 percent lower at 6,366.
The stock markets in Italy and Spain — the two countries that had become the focus of investors’ debt fears in recent weeks — were among yesterday’s best performers, adding 2.4 percent and 1.8 percent respectively.
Eurozone leaders’ reluctance to increase the size of their bailout fund and quickly implement changes to its powers, such as giving it the ability to buy up government bonds, have left the currency union without a clear defense against market troubles over the summer.
While the jobs report out of the US was a welcome relief for investors, who had dumped risky assets for much of the week, concern about the health of big Western economies was set to drag on for the rest of the summer.
“Markets will remain nervous until more convincing signs of recovery emerge,” BMO Capital Markets senior economist Sal Guatieri said. “We still look for a near doubling in [US] GDP growth in Q3 from the 1.3 percent pace in Q2.”
Earlier in Asia, Japan’s Nikkei 225 stock average slid 3.7 percent to close at 9,299.88, and Hong Kong’s Hang Seng dived 4.3 percent to 20,946.14. China’s Shanghai Composite Index lost 2.2 percent to 2,626.42.