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New York - Service sector gains and better-than-expected jobs data in the United States failed to stem a rout in stocks and the euro Thursday, as concerns about Europe’s debt crisis lingered after a French debt auction did not ease wider regional worries.
While stocks briefly pared losses after strong U.S. jobs data raised hopes the country’s beleaguered labour market is improving, fears that the euro zone debt crisis will drag on global growth weighed on investors, who dumped riskier assets for perceived safe havens such as U.S. Treasuries.
U.S. private employers added 325,000 jobs in December, easily beating economists’ expectations, a report by a payrolls processor showed on Thursday. In addition, new U.S. claims for unemployment benefits fell by 15,000 last week.
The data could augur a strong figure for the key U.S. nonfarms payroll report on Friday.
“This is another data point that shows our economy is healing,” said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. “At the same time, I think this sets up the possibility for a disappointment tomorrow,” he said.
The pace of growth in the dominant U.S. services sector also picked up slightly in December, according to an industry report released on Thursday.
The euro extended losses against the dollar, trading at around $1.2806 after hitting its lowest since September 2010. Analysts in a Reuters poll expect the single currency will be the most volatile major currency in January as the region’s debt crisis persists.
Spain, Italy debt sales eyed
The French government’s first bond auction for 2012 saw solid demand at higher yields but was not enough to allay worries about euro zone nations’ abilities to tap markets this year.
The sale was viewed as a key test of sentiment after European Union leaders agreed a plan to tackle the debt crisis in December and a move by the European Central Bank to pump nearly half a trillion euros into the region’s troubled banks.
Markets have also been bracing for France to lose its top-notch credit rating after agency Standard & Poor’s warned in early December of a mass downgrade of euro zone states due to concerns about the bloc’s two-year old debt crisis.
A sterner test of investor sentiment toward Europe is expected next week when Spain and Italy - the two big economies seen as most at risk from the crisis that has already dragged down Greece, Ireland and Portugal - are due to issue bonds.
Shares in Italy’s top bank, Unicredit, were suspended from trading on Thursday, underscoring nervousness around the bloc’s banks. The stock has plunged since the bank on Wednesday set a huge discount on a 7.5 billion euro rights .
The FTSEurofirst 300 index of top European shares, which fell ahead of the French bond auction, trimmed its losses after the ADP report. The index was down 0.65 percent at 1014.89 points, having been as low as 1,011.28 earlier.
The European banking sector dragged again, with the STOXX Europe 600 Banks index down about 2.8 percent.
Stocks in the United States also fell shortly after opening. The Dow Jones industrial average slid 0.64 percent, the Nasdaq Composite Index dropped 0.15 percent and the Standard & Poor’s 500 Index declined 0.5 percent.
U.S. Treasuries reversed earlier losses on jobs data and extended price gains on Thursday after ISM Services data was reported. In commodity markets, crude oil prices eased having earlier risen on fears of supply disruption after the United States and European Union stepped up pressure on Iran agreeing in principle to ban oil imports from the No. 2 OPEC producer.
U.S. February crude dropped 0.4 percent to $102.79 a barrel.
While stocks briefly pared losses after strong U.S. jobs data raised hopes the country’s beleaguered labour market is improving, fears that the euro zone debt crisis will drag on global growth weighed on investors, who dumped riskier assets for perceived safe havens such as U.S. Treasuries.
U.S. private employers added 325,000 jobs in December, easily beating economists’ expectations, a report by a payrolls processor showed on Thursday. In addition, new U.S. claims for unemployment benefits fell by 15,000 last week.
The data could augur a strong figure for the key U.S. nonfarms payroll report on Friday.
“This is another data point that shows our economy is healing,” said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. “At the same time, I think this sets up the possibility for a disappointment tomorrow,” he said.
The pace of growth in the dominant U.S. services sector also picked up slightly in December, according to an industry report released on Thursday.
The euro extended losses against the dollar, trading at around $1.2806 after hitting its lowest since September 2010. Analysts in a Reuters poll expect the single currency will be the most volatile major currency in January as the region’s debt crisis persists.
Spain, Italy debt sales eyed
The French government’s first bond auction for 2012 saw solid demand at higher yields but was not enough to allay worries about euro zone nations’ abilities to tap markets this year.
The sale was viewed as a key test of sentiment after European Union leaders agreed a plan to tackle the debt crisis in December and a move by the European Central Bank to pump nearly half a trillion euros into the region’s troubled banks.
Markets have also been bracing for France to lose its top-notch credit rating after agency Standard & Poor’s warned in early December of a mass downgrade of euro zone states due to concerns about the bloc’s two-year old debt crisis.
A sterner test of investor sentiment toward Europe is expected next week when Spain and Italy - the two big economies seen as most at risk from the crisis that has already dragged down Greece, Ireland and Portugal - are due to issue bonds.
Shares in Italy’s top bank, Unicredit, were suspended from trading on Thursday, underscoring nervousness around the bloc’s banks. The stock has plunged since the bank on Wednesday set a huge discount on a 7.5 billion euro rights .
The FTSEurofirst 300 index of top European shares, which fell ahead of the French bond auction, trimmed its losses after the ADP report. The index was down 0.65 percent at 1014.89 points, having been as low as 1,011.28 earlier.
The European banking sector dragged again, with the STOXX Europe 600 Banks index down about 2.8 percent.
Stocks in the United States also fell shortly after opening. The Dow Jones industrial average slid 0.64 percent, the Nasdaq Composite Index dropped 0.15 percent and the Standard & Poor’s 500 Index declined 0.5 percent.
U.S. Treasuries reversed earlier losses on jobs data and extended price gains on Thursday after ISM Services data was reported. In commodity markets, crude oil prices eased having earlier risen on fears of supply disruption after the United States and European Union stepped up pressure on Iran agreeing in principle to ban oil imports from the No. 2 OPEC producer.
U.S. February crude dropped 0.4 percent to $102.79 a barrel.
