US jobs figures boost markets

Fresh evidence of the absence of wage pressures in the US triggered a bout of exuberance in the financial markets, with Wall Street, Treasury bonds and the dollar all soaring in early trading yesterday, although the Dow ended down 4.6 at 6,656.

Shares in London followed suit, though figures showing a big jump in the trade deficit confirmed that the strong pound has started to damage exports.

The reason for the markets' jubilation was news of a lower-than-expected rise of 0.8 per cent in the US employment cost index in December, a figure upon which analysts had decided the Federal Reserve's next interest rate decision hinged.

At the same time, there were more signs that the US economy remains buoyant. The index of consumer confidence published by the Conference Board jumped to its highest level so far this decade.

The employment cost index showed that total compensation - wages plus benefits - rose by a modest 2.9 per cent last year despite strong growth in employment and an increase in the minimum wage. The wages component climbed by 3.3 per cent in 1996.

Although these were the highest figures since 1991, they were more benign in terms of inflationary worries than hourly earnings, whose growth is currently approaching 4 per cent a year. "This has made it easier for Alan Greenspan to resist the siren voices calling for higher interest rates," said Ian Shepherdson, an economist at HSBC Markets in New York.

A majority of analysts think the Fed chairman will not push for an increase in rates when the Open Markets Committee meets to discuss monetary policy next week. Many predict interest rates will stay flat until the second half of the year.

Yesterday's trade figures for the UK were not thought to have any new implications for Kenneth Clarke's decision on interest rates when he meets Eddie George, Governor of the Bank of England, a week today. Most City economists reckon the Chancellor will leave rates unchanged.

The trade deficit with the EU widened slightly to pounds 260m in November, taking the total deficit from pounds 680m the previous month to pounds 959m. The non- EU deficit surged to pounds 844m in December from pounds 639m in November.

This deterioration was even faster than many economists had feared. Lower export prices and volumes outweighed the favourable impact of lower import prices last month.

The pound's index against a range of other currencies fell by 0.1 to 95.3 yesterday.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

competitive: SThree: Are you passionate about sales?Do you have a keen interes...

Recruitment Genius: Loan Adviser - OTE £30,000

£17000 - £30000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

Day In a Page

Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

Greece referendum

Greeks say 'No' to austerity and plunge Europe into crisis
Ten years after the 7/7 terror attacks, is Britain an altered state?

7/7 bombings anniversary

Ten years after the terror attacks, is Britain an altered state?
Beautiful evening dresses are some of the loveliest Donatella has created

Versace haute couture review

Beautiful evening dresses are some of the loveliest Donatella has ever created
No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

No hope and no jobs in Gaza

So the young risk their lives and run for it
Fashion apps: Retailers roll together shopping and social networking for mobile customers

Fashion apps

Retailers roll together shopping and social networking for mobile customers
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate