European stock markets held firm yesterday in the face of a disappointing US jobs report that sparked a fleeting rise in the euro before the single currency turned weaker against the dollar.
Despite mounting tension on currency markets and the start of a meeting of the world’s top finance chiefs in Washington, it was the latest US government assessment of the job market that preoccupied investors.
The US economy lost 95,000 jobs in September, surprising analysts who had foreseen a flat reading and suggesting the US recovery remained sluggish at best.
European stocks initially lost ground on the report but a closer reading convinced investors that there were some positive points. The unemployment rate, for example, was unchanged at 9.6 per cent.
In addition government payrolls fell by a larger-than-expected 159,000 but the private-sector payroll employment rose 64,000, slightly below expectations.
“The total number was a job loss but if we strip out government, for now we are looking at private-sector payroll growth, which is positive,” said Dan Greenhaus, chief economic strategist at Miller Tabak.
By the close of trade, the London FTSE 100 index was down just 0.08 per cent at 5,657.61 points. In Paris, the CAC 40 fell 0.19 per cent to 3,763.18 points while in Frankfurt the DAX edged up 0.25 per cent to 6,291.67 points.
“The (job) figures were mixed, even if the loss of 95,000 positions (overall) is unsettling,” said Yves Marcais of Global Equities in Paris.
“In any case, we would have to see better figures if the unemployment rate is to show a sustained decline.”
Elsewhere in Europe, Amsterdam fell 0.34 per cent and Madrid 0.18 per cent while share prices in Milan rose 0.28 percent.
Wall Street traded mostly flat. The blue-chip Dow Jones Industrial Average was up 0.25 per cent mid-day, with the tech-heavy Nasdaq down 0.07 per cent.
On the currency market the euro in late-day trade was at $1.3915, down from $1.3923 late Thursday in New York.
The dollar was at 81.86 yen against 82.39 yen on Thursday. But the US unit at one point fell to 81.73, its lowest reading since late April 1995.
The US employment report appeared to strengthen the likelihood that the US Federal Reserve would adopt new economic stimulus measures, likely injecting money into the economy through the purchase of bonds and other assets — action that would depress the dollar further.
As a result the euro rose against the dollar just after the US job figures became known but the gains fizzled out on the realisation that a stronger euro threatened the competitiveness of eurozone exports.
“If the euro remained at its current level it would be consistent with a very sharp export slowdown next year and would have knock-on effects on the domestic economy too,” warned analysts at Capital Economics.
Recent weeks have seen countries from Japan to Colombia intervene to stop their currencies from rising to levels that would make exports prohibitively expensive, sparking talk of a currency war among key trading nations.
“It is a very real threat and it will be in focus this weekend at the IMF-World Bank series of meetings in Washington,” said GFT analyst David Morrison.