Stocks volatile ahead of US jobs data; euro briefly rises above $1.40 for first time since Feb

By Pan Pylas, AP
Thursday, October 7, 2010

World stocks volatile as eyes turn to US jobs data

LONDON — Stock markets in Europe and on Wall Street pared gains Thursday after the Dow Jones industrial average failed to break above 11,000, last achieved in May, and investors remained wary ahead of a closely watched U.S. jobs report.

As stocks shed earlier gains, the dollar garnered some support, having earlier fallen to a fresh eight-month low against the euro and a 15-year low against the yen.

In Europe, the FTSE 100 index of leading British shares was down 13.44 points, or 0.2 percent, at 5,667.95 while France’s CAC-40 rose 4.95 points, or 0.1 percent, to 3,769.86. Germany’s DAX was 18.47 points, or 0.3 percent, higher at 6,289.20.

In the U.S., the Dow Jones index was up just over 2 points at 10,970 an hour into the new session while the broader Standard & Poor’s 500 index rose less than a point to 1,160.66.

Stocks had traded higher after better than expected weekly U.S. jobless claims figures stoked hopes that Friday’s nonfarm payrolls data may outperform market expectations and a raft of upbeat sales figures from retailers, including Macy’s, Abercrombie & Fitch and American Eagle.

The combination helped the Dow catapult up to just two points shy of 11,000 but its failure to breach that level, last seen in May, prompted the modest retreat from highs.

Stocks have been buoyed since Tuesday’s decision by the Bank of Japan to cut its interest rate to near zero percent and its announcement it is preparing a 5 trillion yen ($60 billion) fund to buy government bonds and other assets to prop up the faltering Japanese economy.

Investors have concluded that the Federal Reserve will itself resume asset purchases of some form or other in the next few weeks — the most likely date is thought to be Nov. 3 at the conclusion of its next rate-setting meeting.

Much could well hinge on Friday’s U.S. nonfarm payrolls data, which often set the market tone for a week or two after their release. Most economists think the figures won’t be good enough to stop the Fed from announcing fresh stimulus measures.

The prospect of more dollars in the system have underpinned stocks around the world, but have weighed hard on the U.S. currency itself. By mid afternoon London time, the euro was 0.1 percent higher at $1.3933, around a cent down from its earlier eight-month high of $1.4028.

Some of the heat may have gone out of the euro after European Central Bank president Jean-Claude Trichet voiced his concerns about developments in the currency markets.

“Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability,” Trichet said in a press conference after the bank kept its main interest rate unchanged at 1 percent.

Meanwhile, the dollar was down 0.7 percent at 82.29 yen, just above its earlier 15-year low of 82.12 yen.

The markets are on the lookout for another intervention by the Bank of Japan now that the dollar has fallen below the 82.87 yen level it intervened last month.

Even though, the rate is below the intervention rate, analysts still think that the Japanese authorities can claim a level of success from its earlier action but will need to enter the markets once again to prevent a drop below 80 yen.

“If it were not for the threat of intervention from the Japanese authorities, it is likely that the dollar would be trading closer to its record low at 79.75 yen,” said Lee Hardman, currency economist at the Bank of Tokyo-Mitsubishi UFJ.

“To maintain the credible threat of intervention in the market they will soon have to intervene again as the previous pre-intervention low has now been taken out,” he added.

Besides economic indicators and central bank decisions, the quarterly earnings reporting season begins Thursday — aluminum company Alcoa Inc. is the first major company to report after Wall Street closes later.

“Alcoa’s results will be particularly important as they will set the agenda for third quarter earnings,” said David Buik, markets analyst at BGC Partners.

Trading had been fairly subdued in Asia earlier, with South Korea’s Kospi closing down 0.2 percent to 1,900.85 while Japan’s Nikkei 225 stock averaged dropped 0.1 percent, to 9,684.81. Hong Kong’s Hang Seng index ended flat at 22,884.32.

Benchmark oil for November delivery was down 34 cents at $83.89 a barrel in electronic trading on the New York Mercantile Exchange.


Associated Press Writer Pamela Sampson in Bangkok contributed to this report.

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