A weaker-than-expected US jobs report sent European stock markets into reverse yesterday but gave the euro a boost after a rollercoaster week on concerns over the eurozone debt crisis.
Dealers said early gains for shares after a run of mostly positive US data disappeared quickly when figures showed the US economy created only 39,000 jobs in November, well short of forecasts for 130,000.
In London, the FTSE 100 index of leading shares closed down 0.39 per cent at 5,745.32 points, having been ahead with most markets earlier. In Paris, the CAC 40 edged up 0.09 per cent to 3,750.55 points while in Frankfurt the DAX slipped 0.14 per cent to 6,947.72 points.
The euro was up sharply at $1.3370 in late London trade from $1.3220 in New York late Thursday, with the US currency under pressure after the poor jobs report.
Gold, the traditional safe haven in times of uncertainty, jumped to $1,403.50 an ounce from $1,389 on Thursday.
The “ugly data ... is setting a very negative tone to the end of the week,” said Lindsey Piegza of FTN Financial.
“The market reaction is clearly selling off in response to this. The expectation was for a much stronger report and we did not see that,” she added.
Shares initially extended gains as the European Central Bank came into the market for a second day to buy bonds issued by weaker eurozone governments, helping ease their borrowing costs and bolstering confidence the crisis can be tamed.
ECB head Jean-Claude Trichet yesterday said he had every confidence in the euro as a viable currency but also called on eurozone governments to increase the size of a rescue fund they set up after the Greek debt bailout in May.
This would, he said, show they were equal to the challenges ahead.
Michael Hewson of CMC Markets said the US jobs figures were disappointing, suggesting that the economy continues to struggle and that the US Federal Reserve may have to do even more to get it back on track.
The Fed has adopted a policy of Quantitative Easing – essentially the printing of new money to force-feed demand but which also undermines the value of the dollar.
Mr Trichet on Thursday insisted expressly that the ECB would not go down the same road even if it would extend some of its stimulus measures.
Christopher Purdy at Spreadex in London said the stock markets “were shaken by the unemployment report and have scrambled to regain their footing to climb back a bit towards morning levels.
“Recovery remains fragile and markets are undecidedly teetering ahead of the weekend,” he added.
In other European markets, Amsterdam added 0.22 per cent, Brussels slipped 0.08 percent, Madrid gained 0.68 per cent – helped by new government plans to cut debt – Milan rose 0.33 per cent and Swiss stocks were down 0.66 per cent.
In the bond markets, the ECB intervention was substantial and had an immediate impact – the yields, or the return earned by holders, on 10-year Irish and Portuguese bonds fell to 7.906 per cent and 5.714 per cent, respectively, from 8.297 per cent and 5.854 per cent on Thursday.
In New York, the blue-chip Dow Jones Industrial Average was off 0.29 per cent at around 1715 GMT while the tech-rich Nasdaq Composite slipped 0.09 per cent.