US jobs figures help shore up world markets but Greek debt crisis still in focus

US jobs figures help shore up world markets

LONDON — A strong set of U.S. jobs data Friday has helped shore up confidence in world markets following days of extreme volatility amid mounting fears that Europe’s debt crisis could spread and derail the global economic recovery.

In Britain, where investors were grappling with uncertain general election results, the FTSE 100 index was down 10.17 points, or 0.2 percent, at 5,250.82, while the pound oscillated wildly.

Germany’s DAX fell 24.63 points, or 0.4 percent, at 5,883.63 while the CAC-40 in France was 46.61 points, or 1.3 percent, lower at 3,509.50.

All three indexes had been sharply lower earlier following big declines in Asia — Japan’s benchmark Nikkei index closed 3.1 percent down at 10,364.59 — and Thursday’s dramatic events on Wall Street, when a trading error apparently played a role in pushing the Dow Jones industrial average down 1,000 points at one stage.

The Dow recovered to finish “only” 347.8 points lower and further respite is expected at the open after the strong U.S. jobs data — Dow futures were up 40 points, or 0.6 percent, at 10,514 while the broader Standard & Poor’s 500 futures rose 7.7 points, or 0.7 percent, at 1,130.10.

The figures from the U.S. Labor Department showed that employers expanded payrolls by 290,000. That’s the most in four years and more than the 200,000 anticipated. However, the jobless rate rose to 9.9 percent from 9.7 percent, mainly because 805,000 jobseekers — perhaps feeling better about their prospects — resumed their searches for work.

“If the economy continues to create more than 200,000 net jobs a month the unemployment rate will begin to fall and the downward pressure on wages will eventually ease,” said Paul Ashworth, senior U.S. economist at Capital Economics.

“One month doesn’t make a trend, but if the U.S. economy can maintain this pace of job growth then there are very clear upside risks to our current forecast that growth will falter next year,” he added.

Despite the jobs recovery taking place in the U.S., investors around the world remain uneasy about the prospect of trouble in the eurozone from Greece’s crisis. Many economists say Greece may be insolvent in the end despite a eurozone-International Monetary Fund bailout, and there are fears that other countries will face bond market skepticism — and higher borrowing costs that will worsen their finances in a vicious spiral. That could undermine markets and consumer confidence just as Europe crawls out of recession.

They were further rattled by the massive sell-off on Wall Street Thursday.

Though the collapse was blamed in part on a trading error and regulators said they were reviewing what had happened, the drop fed into a prevailing fear that Greece’s debt crisis was spreading to Portugal and Spain and possibly further afield. Finance ministers from the Group of Seven nations will hold a teleconference later in the day to discuss the situation, Japan’s finance minister Naoto Kan said.

Stock markets weren’t alone in seeing massive swings — in the currency markets, the dollar was down a massive 6 yen at 88.68 yen one stage, while the euro dropped to $1.2520, its lowest level in 14 months. The retreats were reversed though and the dollar was trading 1.8 percent higher on the day at 92.45 yen while the euro was up 0.5 percent at $1.2699.

“Contagion has smashed risk appetite and created panic while a ‘fat finger’ glitch has created mayhem in equities,” said Neil Mackinnon, global macro strategist at VTB Capital.

“Caution remains the watchword especially in front of the G7 conference call where markets will be wary of support/intervention action,” said Mackinnon.

The scale of the current stage in the crisis was evident in the news that the Bank of Japan was offering two trillion yen ($22 billion) in short-term loans to commercial banks to boost liquidity after the dollar had tumbled.

“We would like to ensure stability in financial markets by providing ample funds to banks,” Bank of Japan official Yuichi Adachi said. He declined to elaborate further.

As if all that wasn’t enough, investors, particularly in London, had to grapple with the inconclusive outcome of the British general election.

With the counting of the votes coming to an end, it’s clear than no party has won enough seats to control Parliament. The parties are assessing the situation to see if any alliances can be concluded or whether the Conservative Party, which won the most seats and votes, will go it alone.

The uncertainty — markets don’t like uncertainty — was most evident in the currency markets where the pound tumbled 1.8 percent to a year low of $1.4481 at one stage before recovering somewhat to be trading 0.5 percent lower on the day at $1.4671.

Across Asia, stocks were hit hard even though the government debt crisis is centered on Europe — all the main indexes ended lower with Taiwan, Indonesia, Thailand and New Zealand down sharply. China’s Shanghai Composite Index closed 1.9 percent lower while Hong Kong’s Hang Seng index ended around 1.1 percent down.

“Financial markets have begun to over-run policymakers’ ability to implement measures to stem the crisis,” said Sean Darby, a strategist with Nomura in Hong Kong. “A strong dollar and the flight to quality mean that Asian equities have also been drawn into the contagion.”

Oil markets were also oscillating wildly — benchmark crude for June delivery was up 58 cents to $77.69 a barrel in electronic trading on the New York Mercantile Exchange. That modest rise follows the $2.86 slide on Thursday.

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Associated Press Writer Alex Kennedy in Singapore contributed to this report.