Stocks ease on soft US jobs data as dollar slides to fresh 15-year yen low

By Pan Pylas, AP
Wednesday, October 6, 2010

Stocks ease on soft US jobs data as dollar slides

LONDON — European stock markets gave up some of their gains Wednesday after a subdued opening on Wall Street following disappointing U.S. jobs data.

Expectations that the U.S. Federal Reserve is preparing to unveil more monetary stimulus continued to hit the dollar hard, as it sank to a fresh eight-month low against the euro and a new 15-year low against the yen.

In Europe, the FTSE 100 index of leading British shares was up 42.17 points, or 0.8 percent, at 5,677.93 while Germany’s DAX rose 43.17 points, or 0.7 percent, at 6,259. The CAC-40 in France was up 34.33 points, or 0.9 percent, at 3,766.26.

In the U.S., the Dow Jones industrial average was up 9.16 points, or 0.1 percent, at 10,953.88 soon after the open while the broader Standard & Poor’s 500 index was less than a point to 1,160.80.

U.S. stocks had been heading for a brighter opening, following big gains on Tuesday amid mounting expectations that the Federal Reserve will introduce more monetary stimulus measures next month.

However, the monthly survey from private payrolls firm ADP stoked concerns that this coming Friday’s nonfarm payrolls report for September may be worse than expected. ADP found that U.S. employers shed 39,000 jobs during September, in contrast to market expectations for a 20,000 or so increase.

“This does not augur well for nonfarm payrolls,” said David Buik, markets analyst at BGC Partners.

In most months, the payrolls data often set the market tone for a week or two after their release. This time, they may be even more important than usual — most economists think that the Fed is ready to announce further measures at the beginning of next month as the figures are not expected to show the U.S. economy creating a significant amount of jobs.

Expectations of further action by the Fed underpinned Tuesday’s big stock market gains around the world.

The catalyst to the rally was the Bank of Japan’s surprise decision Tuesday to cut its key interest rate to a range of zero to 0.1 percent. More importantly in the context of the world economy, the bank said it was paving the way for a 5 trillion yen ($60 billion) fund to buy government bonds and other assets to prop up the faltering Japanese economy.

“What they have done has served to reinforce the belief that the Federal Reserve will soon start up the printing presses and resume asset purchases of some form or other in the next few weeks,” said Michael Hewson, market analyst at CMC Markets.

All this is having a dramatic impact on the dollar.

By mid afternoon London time, the euro was up 0.3 percent on the day at $1.3873, just shy of its earlier eight-month high of $1.3884. Meanwhile, it was 0.3 percent lower at 82.92 yen, just above its earlier 15-year low of 82.77 yen.

The markets are on the lookout for another intervention by the Bank of Japan. Last month, it bought dollars when it had fallen to 82.87 yen in an attempt to stem the export-sapping appreciation of the Japanese currency.

Besides economic indicators, the quarterly earnings reporting season begins Thursday — aluminum company Alcoa Inc. is the first major company to report — a number of the world’s major central banks are meeting. On Thursday, both the European Central Bank and the Bank of England meet.

In Asia, Japan’s benchmark Nikkei 225 stock average closed up 1.8 percent, or 172.67 points, at 9,691.43 after surging 1.5 percent the previous day.

South Korea’s Kospi rose 1.3 percent to 1,903.95. Australia’s S&P/ASX 200 was up 1.7 percent at 4,686.8 and Hong Kong’s Hang Seng jumped 1 percent to 22,880.41.

Markets in Malaysia, New Zealand, Singapore, Bombay and Taiwan also advanced. Financial markets in mainland China are closed through Oct. 7 for the National Day holidays.

Benchmark oil for November delivery was down 2 cents to $82.80 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.35 to settle at $82.82 on Tuesday.


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

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