Investors continued to bid up global share prices yesterday, with signs of underlying stability in the US economy pushing US markets to their highest level since before the credit crisis.
The gains came after a record January on both sides of the Atlantic. The Dow Jones Industrial Average enjoyed its best start of the year since 1994, up nearly 6 per cent over the month, while in London, the FTSE 100 booked its strongest January in nearly a quarter of a century. British blue chips gained 6.4 per cent, the best January performance since 1989, when they climbed by more 14.4 per cent.
Yesterday, figures confirming underlying strength in the US labour market, along with data showing that the American manufacturing sector had expanded in January, helped the Dow gain 149.21 points to close at 14,009.79 – the first time it's closed above the 14,000 point mark since October 2007, nearly a year before the collapse of Lehman Brothers.
Official figures showed that American employers added 157,000 jobs last month, which led to a marginal uptick – 0.1 per cent – in the unemployment rate to 7.9 per cent. The market, however, took heart from upward revisions in the figures for November and December, with the Labour Department saying there were 127,000 more jobs created over the two months than previously reported.
The higher numbers confirmed that, even though American GDP contracted by 0.1 per cent over the final three months, the underlying picture remained encouraging.
Of particular interest to economists was the improvement in jobs in the construction sector, indicating that the recent improvements in the housing sector, which been aggressively supported by the US Federal Reserve, might finally be generating jobs.
Two separate reports showing an expansion in manufacturing also fed the bulls, who overlooked the weak spots. The US Institute of Supply Management said its manufacturing purchasing managers' index had climbed to 53.1 in January from 50.2 in December, while the data firm Markit said its own gauge of factory activity had climbed to 55.8. In both instances, readings above 50 indicate expansion.
Both the Dow and the S&P 500 showed strength, while in London, the FTSE 100 closed at 6,347.24, up more than one per cent, with UK data also showing signs of improvement.
Manufacturers, one of the culprits behind Britain's shock 0.3 per cent decline at the end of 2012, managed their second successive month of growth, according to the Chartered Institute of Purchasing & Supply. Official insolvency figures, meanwhile, showed the lowest number of firms going bust for more than four years.