NEW YORK, Feb 3 — Global stocks surged today as a jump in US job growth whetted investor risk appetite, though easing expectations for more liquidity from the Federal Reserve pressured the euro.
US nonfarm payrolls climbed 243,000, the Labour Department said, the most since April and well ahead of economists’ expectations for a gain of 150,000.
“I was not looking for anyting like this. It’s certainly supportive of the US recovery and suggests that momentum is gathering pace,” said Brian Dolan, chief market strategist with Forex.com in Bedminster, New Jersey.
With the US recovery showing signs of gaining momentum, analysts said the US Federal Reserve could have less reason to step into markets with another round of quantitative easing to add more liquidity.
“From a trading standpoint, it’s positive for risk, but it also lowers the prospects for QE3, which is dollar positive,” Dolan added. “That’s why the euro, after moving higher, is drifting back now. The possibility of QE3 probably gets pushed back to the second half of the year.”
US stocks rose sharply at the open. The Dow industrials rose 69.48 points, or 0.55 per cent, at 12,774.89 after the market open, with the S&P 500 up 9.55 points, or 0.72 per cent, at 1,335.09 and the Nasdaq up 27.43 points, or 0.96 per cent, at 2,887.11.
European shares hit a fresh six-month high, with the FTSEurofirst 300 index of top European shares jumping to as high as 1,072.34.
Despite the euro zone’s continuing crisis, the index is up about 25.6 per cent from the 2011 low it hit in September.
The euro fell to a session low against the dollar today after the data, with investors seeing a smaller chance of further quantitative easing anytime soon.
“There does not appear to be any particular economic urgency for the Fed to step in, so I think that is consistent with our central view of steady Federal Reserve policy through 2012,” said Vassili Serebriakov, currency strategist with Wells Fargo Bank in New York.
The euro last traded at US$1.3080 (RM3.95), down 0.59 per cent. The dollar was last at 76.62, up 0.55 per cent, after touching a session high of 76.69 yen.
Prices for US Treasuries, often considered a safe haven in times of economic turmoil, plunged after the data.
According to Jefferies, dealers were long Treasuries by US$91.859 billion on January 25, which is the second highest long position on record.
They are now likely dumping these positions after the stronger than expected payroll number and ahead of the Treasuries planned US$72 billion in new three-year, 10-year and 30-year bonds supply next week.
The 10-year notes were last down 1-1/32 in price to yield 1.94 per cent, up from 1.82 per cent late yesterday. Thirty-year bonds dropped 2-22/32 in price to yield 3.14 per cent, up from 3.01 per cent.
The strong US data took center stage, with worries about ongoing talks between Greece and its creditors for a debt restructuring deal playing a secondary role.
Uncertainty about progress in debt swap talks in Athens coloured the early market backdrop, amid signs euro zone governments putting the finishing touches to more emergency funding for Greece may have to beef up their contributions.
Euro zone governments working on the second Greek financing package may have to add €15 billion (RM59.55 billion) more than expected, EU sources said today, to help recapitalise the Greek banking sector once the private-sector deal is struck.
Athens is scrambling to wrap up talks on a €130-billion rescue plan and a bond swap deal before big bond redemptions come due in March.
There were also signs of life in the moribund euro zone from a business survey (PMI) showing the private sector economy snapped a four-month decline in January and expanded, albeit very weakly and roughly in line with earlier flash estimates. — Reuters
