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Downbeat US jobs data beats down world stocks
[LONDON] A sharp slowdown in hiring in the United States sent stocks slumping as it raised concerns for the economic outlook and the perspectives for interest rates in the world's top economy.
Wall Steet opened on the downside following data showing the US economy added just 160,000 net new jobs in April, the lowest level this year, with the Dow sliding 0.4 per cent.
European stocks, which had been trading lower ahead of the release of the nonfarm payroll data from the US Labor Department, dipped further before recovering partially.
London's benchmark FTSE 100 index was down 0.6 per cent in afternoon trading, while Frankfurt's DAX 30 index shed 0.3 per cent and the Paris CAC 40 lost 0.7 per cent in value.
The jobs growth figure was well below expectations and pointed to the impact of the sharp slowdown of the US economy to a 0.5 per cent growth rate in the first quarter of the year. Analysts had expected a modest slowdown from March to about new 207,000 jobs.
"US equities are lower in early action following a disappointing April nonfarm payroll report, which has the Street grappling with how the Fed will respond through monetary policy," said analysts at brokerage Charles Schwab.
Meanwhile market analyst Patrick O'Hare said the report was "a real pickle for the Fed".
The sour part of the report was the slowdown in job creation, but that was matched by the sweet news of a 0.3 per cent increase in average hourly earnings.
"What isn't too kosher for the market about that statistic is that it provides some rationale for a purportedly data-dependent Fed to raise the fed funds rate in June," said Mr O'Hare.
The dollar fell after the release of the data, indicating that currency traders initially saw less likelihood the Fed will move to increase interest rates at its next monetary policy meeting in June.
The euro rose US$1.1428 in afternoon London trade, but was still down from the eight-month high of US$1.1616 it struck on Tuesday.
While lower interest rates and a weaker dollar are usually good for the stock market, investors have been troubled by slowing economic growth.
"European markets look set to finish lower for the second week in succession as concerns about a weakening growth outlook and the efficacy of central bank policy in combating it start to weigh on sentiment," said Michael Hewson, chief market analyst at CMC Markets UK.
Confidence on trading floors has been sparse the past two weeks following disappointing data and announcements from China to the United States that tore a hole in hopes the world economy was showing signs of recovery.
On Friday, Asian stock markets mostly fell as lingering worries over global growth sent traders running from higher-risk assets.