By: Dr. Mike Campbell
Analysts had hoped that the recent trend towards higher employment in the world’s largest economy would continue apace in March with the creation of a further 200000 new jobs. In the end, whilst jobs were indeed created, the numbers were a disappointment. The figure came in at 60% of the anticipated level with 120000 people finding work. This level of jib creation is the weakest seen in five months and, naturally, led to renewed concerns about slowing down of the global economy.
The release of the figures coincided with the Easter break which saw a four day holiday in many markets; consequently market response was delayed. When European markets opened on Tuesday, stocks showed some heavy losses. The Cac fell by more than 3% and the FTSE and Dax both lost 2.5%, but the markets have rallied today (Wednesday). The financial sector saw the worst of the initial losses with France’s Societe Generale and BNP Paribas down by 6.2 and 5.7% respectively. UK banks Barclays and Lloyds shed 5.9 and 5% respectively and Germany’s Commerzbank was also off by 5.9%.
The European sovereign debt crisis could be heard doing warm-ups in the wings with renewed doubts about Spain’s ability to handle her debts sending the yield on 10-year bonds to their highest level of the year at 5.99% - still well below the 7% level which is seen as unsustainable over the longer run. On the brighter side, concerns over the global economy sent oil lower with Brent crude dropping by $2 per barrel to the $120 mark.
The Dow lost 1.7%, its worst one-day fall of the year, but in today’s trading, it has already clawed back 0.9% of that loss. Conflicting economic signals make for volatile trading conditions and mean that trends take longer to become established.