American jobs growth sends shares prices into dive
Saturday 09 March 1996
At one point the FT-SE 100 index was 72 points lower but it regained some of its poise towards the end of the session, closing 47.9 points off at 3,710.3. The day's loss means the index is now only 21 points, less than 1 per cent, higher than at the beginning of the year.
Tumbling share prices took dealers by surprise. Mike Butler, a trader at Panmure Gordon, said: "I can't remember having seen an interest rate reduction and the market down 60 points. It's all about America, of course, but I wouldn't be surprised to see the market better in a week's time."
Others took the view, however, that the strengthening of the US economy had given European banks less scope for rate cuts. There was speculation that had Kenneth Clarke left the quarter-point cut until Monday he would not have felt able to reduce rates.
Fears that yesterday's cut may be the last for some time pushed the 10- year gilt lower, driving the yield 21 basis points higher to 8.06 per cent, the highest for almost five months.
Wall Street was briefly sent reeling on news of a giant leap in job numbers in the US economy in February, which dashed hopes of a further cut in interest rates by the Federal Reserve.
The statistics initially had a devastating effect on the Dow Jones industrial average, which plunged by as much as 116 points in the first half hour of yesterday's trading. The index later stabilised somewhat and was off by around 70 points at the lunch hour.
The biggest beating was taken by the bond market, however, with the Treasury 30-year long bond down by 3 points in early trading. Even by noon, the 30-year bonds were still off by a sobering 2.5 points while the yield has climbed steeply from 6.47 per cent to 6.71 per cent.
Sparking it all was the report from the US Labor Department showing a net rise of 705,000 non-farm jobs in February, far exceeding most analysts' expectations. It was the biggest single monthly gain in 13 years. The overall unemployment rate fell to 5.5 per cent.
The report in effect torpedoed the notion popular with many analysts over recent weeks that the expansion in the US economy had run its course and that a period of recession might even have been in prospect. It was that scenario that had kept hopes alive that the Federal Reserve might have made one more cut in interest rates at its next policy meeting on 26 March.
By contrast, an unemployment rate of 5.5 per cent is likely now to stir renewed fears of a return of inflationary pressures in the US economy as employers begin to face difficulties in maintaining workforce numbers. Against that kind of background any monetary easing is seen as most unlikely.
The market jolt raised some fears that the Dow Jones index, which has set 16 record highs this year already, might at last be due for a correction or even a disastrous reverse reminiscent of the collapse of 1987.
Comment, page 21
Market Report, page 22
- 1 The difference between a migrant and refugee, in one sentence
- 2 Miley Cyrus calls out hypocrisy of women’s nipples being taboo
- 3 iPhone 5c to be discontinued, no iPhone 6c to replace it
- 4 Jozef Wesołowski: Former Catholic archbishop found dead ahead of child sexual abuse trial
- 5 Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
Spain accused of 'provocation' after letting Russian submarine refuel off Gibraltar
Allonautilus scrobiculatus: World's 'rarest' creature spotted for only the third time ever
Miley Cyrus address Robin Thicke VMA controversy: ‘He wanted me as naked as possible, but I got the heat because I’m a woman’
Miley Cyrus calls out hypocrisy of women’s nipples being taboo
Celebrity Big Brother 2015: Tila Tequila kicked off show after 'describing Hitler as a good man'
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
Labour leadership: Jeremy Corbyn accused of 'deluding' young supporters with 'claptrap'
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
Iain Duncan Smith calls for urgent ESA overhaul as part of drive to cut down welfare costs
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...