Member Article

Markets plunge on disappointing US jobs data

Weak equity markets were hit by what can only be described as terrible jobs data from the US today, with Nonfarm payrolls for May coming in at a mere 69,000, against expectations of 150,000. There were also revisions to previous data, with payrolls for April down to 77,000, from the previous reading of 115, 000. The overall unemployment rate edged up to 8.2% from 8.1% previously, bucking the trend of improvement since last October and signalling that a strong US recovery may not come to fruition this year. The effect on all corners of financial markets was significant.

Equities in the UK, and futures in the US, were already trading down close to 1%, dropped further. The German DAX, which was already under water by more than 2.5% before the number, fell further to losses closer to 4%. Other risk assets didn’t escape the risk-off rotation, Brent crude falling more than 3% to $98/bbl on the disappointing economic picture. The flight to safe haven government debt continued at pace, with new record yields being set on some of the 10 year debts of UK, US and Germany. The latter reached a yield of 1.14%, a staggering phenomenon. Gold, whose correlation to risk have been mixed of late, rose almost 3% today, presumably on expectations of more quantitative easing in the US.

The FTSE 100’s comparatively muted fall once again masked a disturbing price screen, with a significant number of constituents falling more than 3%, with energy, financials and miners hit by the data.

BP was however an exception to the above, one on the few gainers on the index following news that it is to pursue a potential sale of its 50% stake in its joint Russian venture TNK-BP. Analysts pointed out that whilst BP would lose 26% of its reserves and 29% of its production, it would only forgo 1% of its revenue, in a deal that could be worth around $32 billion. Shares in the company finished up 1.8% at 402.

The UK’s FTSE 100 finished at 5260, down 46.7 points or a fall of 0.9% fall, Germany closed down almost 3.5%.

This was posted in Bdaily's Members' News section by James .