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US jobs data knock stocks off record pedestal

Oct 06 2017 20:08

London - US stocks slid off record highs on Friday after data showed US payrolls contracted for the first time in seven years last month.

However other elements of the job report were positive, setting the dollar screaming higher on anticipation of a US interest rate hike.

The 33 000 drop in non-farm jobs was attributable to major hurricanes that struck Texas and Florida, but analysts had still expected the US economy to add 75 000 jobs.

That was enough for Wall Street stocks to slide off record highs, including the S&P 500 which clinched Thursday its longest winning streak since 1997 with six consecutive gains.

The Dow was down 0.9%, with the S&P 500 off 0.2%.

US stocks were down on "the September nonfarm payroll report showing jobs declined for the first time since 2010 due to the impact of the hurricanes, but the unemployment rate fell surprisingly and wage growth easily topped forecasts," said analysts at Charles Schwab brokerage.

The unemployment rate dropped another two tenths of a point to 4.2%, its lowest level since February of 2001. Average hourly earnings - which can point to looming inflation - rose by 0.5%, beating expectations of 0.3%.

"Treasury yields and the US dollar are higher on the data, which appears to be solidifying December Fed rate hike expectations," they added.

Research analyst Lukman Otunuga at FXTM said the drop in the jobs numbers would usually be enough to set analysts worrying about the health of the economy, but the wage gains raised hopes for a needed boost to inflation.

"The 0.5% month-on-month rise in hourly wages played a leading role in the dollar's sharp appreciation ... With the unemployment rate hitting its lowest level since 2001 at 4.2%, the overall report was encouraging and should support expectations of higher US interest rates."

The dollar later turned lower on profit-taking.

Meanwhile the euro struggled for much of the day due to Spain's ongoing crisis over Catalonia threatening to break away. The single currency sank to below $1.17 - having topped $1.20 two weeks ago - before recovering.

Madrid stocks shed 0.3% in closing trade.

"Cracks are appearing in Catalonia's move to independence, but until the notion of independence is dispelled, contagion risk remains," said Jasper Lawler, head of research at London Capital Group.

London's FTSE 100 was able to buck the trend with a slight gain as a weaker pound lifted share prices of multinationals. On the downside, EasyJet lost 1.6% as a trading update failed to impress investors.

The pound faced renewed pressure as the future of British Prime Minister Theresa May, whose much-anticipated Conservative Party conference speech this week ended in disaster, was called into question.

There are worries that her removal could spark fresh uncertainty in Britain as it negotiates with the European Union over leaving the bloc.

Thursday's rally in New York extended into Asia on Friday, where Tokyo's Nikkei ended 0.3% higher at the highest level for more than two years, while Hong Kong added 0.3% to finish at a peak not seen since the end of 2007.

Other key market moves:

  • London - FTSE 100: Up 0.2% at 7 522.87 points (close)
  • Frankfurt - DAX 30: Down 0.09% at 12 955.94 (close)
  • Paris - CAC 40: Down 0.4% at 5 359.90 (close)
  • Madrid - IBEX 35: Down 0.3% at 10 185.50
  • EURO STOXX 50: Down 0.3% at 3 602.50
  • New York - DOW: Down 0.09% at 22 754.52
  • Tokyo - Nikkei 225: Up 0.3% at 20 690.71 (close)
  • Hong Kong - Hang Seng: Up 0.3% at 28 458.04 (close)
  • Shanghai - Composite: Closed for a public holiday
  • Euro/dollar: Up at $1.1729 from $1.1706 at 21:30 GMT Thursday
  • Dollar/yen: Down at 112.77 yen from 112.83 yen
  • Pound/dollar: Down at $1.3053 from $1.3115
  • Oil - Brent North Sea: Down $1.57 at $55.43 per barrel
  • Oil - West Texas Intermediate: Down $1.50 at $49.29

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