American jobs growth sends shares prices into dive

Shares dived in London and New York yesterday as higher-than-expected US jobs data spiked hopes of further base rate cuts. The FT-SE 100 index of leading stocks shrugged off yesterday's quarter-point reduction in the cost of borrowing, taking its lead from a panicky opening in New York.

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

Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
Life and Style
food + drink
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Sexual health charities have campaigned for the kits to be regulated
healthAmerican woman who did tells parents there is 'nothing to be afraid of'
Life and Style
Arts and Entertainment
The John Peel Lecture has previously been given by Pete Townshend of The Who, Billy Bragg and Charlotte Church
musicGodfather of punk will speak on 'free music in a capitalist society'
peopleAt least it's for a worthwhile cause
Shoppers in Covent Garden, London, celebrate after they were the first to buy the iPhone 6, released yesterday
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments