(FILES) This file photo taken on September 10, 2015 shows an office worker sitting at her desk in Washington, DC. The US economic slowdown hit hiring by companies and government authorities last month, with just 160,000 net new jobs created, the lowest level this year, the Labor Department reported May 6, 2016. The overall unemployment rate held at 5.0 percent, and wage growth picked up pace to 2.5 percent year-on-year, a possible sign of continuing firming in the jobs market. / AFP PHOTO / Andrew Caballero-Reynolds
LONDON: Data showing lacklustre job creation in the United States squelched a rally on European equity markets on Friday, also sending the dollar and Wall Street lower.
Data from the US Labour Department showed the economy generated a paltry 38,000 net new positions in May, a quarter of the amount expected, and the lowest number since September 2010.
Coupled with downward revisions to the two previous months’ totals, removing 59,000 jobs originally tabled, the report crumbled the widely accepted picture that the US economy was picking up solidly from a first-quarter slump and pulled the rug out from expectations under the Federal Reserve will raise interest rates this month.
Expectations had been running high for a June or July US rate hike after Federal Reserve chair Janet Yellen recently said that such a move could be justified “in the coming months”, citing solid US economic growth and a strengthening labour market.
Rate hike still on?
Just as US investors were getting used to the idea that we were going to see some form of rate rise in the next two months this jobs number has thrown that into serious doubt, and if this slowdown continues raises the question as to whether we’ll see a rate rise at all this year,” said analyst Michael Hewson at CMC Markets.
The US dollar dropped by a cent and half against the euro, and fell further against the yen after the jobs data was released.
Around 1530 GMT, the euro had climbed to US$1.1339 from US$1.1154 late on Thursday.
US stocks also took a hit, with the Dow dropping 0.4% in late morning trading.
Modest gains in early European trading disappeared after the US jobs data was released.
Both Paris and Frankfurt fell by 1.0%.
But gains in commodities and energy stocks thanks to the weaker dollar helped London’s benchmark FTSE 100 index keep in the green, closing up 0.4%.
One share that did soar in Paris was that of AccorHotels, which shot up 6.7% on a report in the daily Le Figaro that the Chinese group Jin Jiang plans to nearly double its stake to just under 30%, the level at which it would have to make a buyout offer to other shareholders.
Asian markets climbed higher Friday, with Tokyo’s main stocks index ending 0.5% higher, as they built of the solid gains on Wall Street on Thursday, when the S&P 500 hit a seven-month high as investors had been confident the jobs report.
Eyes also remained fixed on Britain, which votes June 23 on whether to remain part of the European Union.
The pound, which fell sharply earlier in the week on voter uncertainty, clawed back some ground against the dollar on Friday.
Prime Minister David Cameron on Thursday urged Britons not to “roll a dice“ by leaving the EU in his first television grilling of the referendum campaign, three weeks before the tight vote. - AFP
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