Markets hit by concerns over Fed policy
LONDON -- Stock markets turned lower on Friday as investors worried that a strong rise in U.S. jobs figures meant the Federal Reserve will stick to its plans to rein in its monetary stimulus.
A U.S.government report showed employers added 195,000 jobs in June and hiring was more robust in the two previous months than earlier estimated. The unemployment rate, however, remained at a relatively high 7.6 percent.
The report suggests growth is increasing in the world’s largest economy and that the Federal Reserve would likely begin winding down its monetary stimulus in the autumn.
Some investors took that as good news, having worried that the Fed might act earlier. But it disappointed others who appeared to have hoped the Fed would delay the move until next year.
The program has been behind market gains in recent years and investors have in recent weeks fretted over what will happen as it is wound down.
Harm Bandholz, analyst at UniCredit bank, said the implications of the figures were that the ‘tapering’ of the Fed stimulus is getting closer. But the lack of a further drop in the unemployment rate means the Fed is unlikely to be aggressive in tightening the money taps.
In Europe, Britain’s FTSE 100 lost all gains to trade 0.7 percent lower at 6,375.52. Germany’s DAX slumped 2.4 percent to 7,806.00 and France’s CAC-40 shed 1.5 percent to 3,753.85.
Wall Street traded higher, but mainly because it was catching up with a global rally when it was closed on Thursday for the Independence Day holiday. The Dow rose 0.6 percent to 15,084.18, having been significantly higher on the open. The broader S&P 500 advanced by 0.7 percent to 1,626.16.
Markets jumped higher on Thursday after the European Central Bank and the Bank of England both said their interest rates would remain low for the foreseeable future. That eliminated concerns that they might follow the Fed in tightening their easy money policies this year, triggering a market rally.
Also hurting markets on Friday were fears of a violent escalation in Egypt’s crisis. Army troops opened fire Friday on protesters demanding the reinstatement of toppled President Mohammed Morsi.
Instability in Egypt has been pushing oil prices higher. The country is not an oil-producer, but its control of the Suez Canal, one of the world’s busiest shipping lanes, gives it a crucial role in maintaining energy supplies, particularly to Europe.
Benchmark crude for August delivery was up $1.67 at $102.91 a barrel in electronic trading on the New York Mercantile Exchange.
In Asia, Tokyo’s Nikkei 225 closed up 2.1 percent to 14,309.97 and Hong Kong’s Hang Seng added 1.9 percent to 20,854.67 as investors there caught up with the rally in Europe the previous day.
Taipei’s TAIEX jumped 1.4 percent to 8,001.82 while Sydney’s S&P/ASX 200 edged up 1 percent to 4,841.70 and China’s Shanghai Composite posted a small gain of 0.1 percent to 2,007.29.
Seoul’s KOSPI fell 0.3 percent to 1,833.31 after shares of Samsung Electronic dropped nearly 4 percent after its quarterly operating profit failed to meet market expectations. The company estimated April-June earnings at a record high 9.5 trillion won ($8.3 billion) but that was below analysts’ forecasts and investors are worried profit growth could slow as smartphone sales in rich nations reach a saturation point.
In currencies, the euro fell to $1.2821 from $1.2902. The dollar rose to 100.95 yen from 100.23 yen late Thursday.
TALK TO US
If you'd like to leave a comment (or a tip or a question) about this story with the editors, please email us. We also welcome letters to the editor for publication; you can do that by filling out our letters form and submitting it to the newsroom.