European stocks closed mostly lower yesterday as weak EU data offset a much better-than-expected US jobs report, upping the pressure on the euro as concerns mount over the single currency’s future.
Dealers said the US figures did give stock markets a brief boost but the gains were soon lost, with the euro slumping to fresh 16-month lows as investors compared the prospect of recession in Europe with solid US growth.
They said the data confirmed the view that the world’s biggest economy is finally turning the corner and highlighted the problems in the eurozone where Spain and Italy struggle to stay afloat.
The US unemployment rate dropped to 8.5 per cent in December, the lowest level in nearly three years, as hiring surged more than expected to 200,000, topping forecasts for 150,000.
A litany of bad news from Spain and Italy on their stalled economies and strained public finances is driving fears that they could be next to need EU-IMF bailouts after Greece, Ireland and Portugal.
A warning by International Monetary Fund chief Christine Lagarde that the IMF will cut its 2012 growth forecasts added to the negative tone while here remarks that the euro was unlikely to “vanish” this year only stoked concerns about the currency.
By the close, London managed to buck the trend with the FTSE index of leading companies gaining 0.45 per cent to 5,649.68 points but in Paris, the CAC-40 index fell 0.24 per cent at 3,137.36 points and in Frankfurt the DAX 30 dropped 0.62 per cent to 6,057.92 points. Milan lost 0.82 per cent and Madrid was down 0.49 per cent. The euro tumbled to $1.2698, a level last seen in early September 2010, extending losses after breaching $1.28 earlier this week as the US data supported the dollar.
“The euro continued its spiral downwards today as US nonfarm payrolls came in at a very healthy 200,000 jobs and the unemployment rate fell to its lowest level since February 2009,” said analyst Ian O’Sullivan at traders Spread Co.
“We still think $1.27 is going to go and we may see $1.25 hit within a few weeks at this rate. The United States continues to produce healthy economic numbers as Europe teeters on the brink of collapse,” Mr O’Sullivan said.
On a visit to South Africa, Ms Lagarde appeared to offer only tentative support. “Will 2012 be the end of the euro? My answer is, I don’t think so,” Ms Lagarde told a press conference. “The currency itself is not likely to vanish or disappear in 2012.
“Will Greece quit the eurozone in 2012? The euro partners have reaffirmed their determination (that that will not happen). We can only support that,” she said.
Italian Prime Minister Mario Monti meanwhile met France’s President Nicolas Sarkozy in Paris against a backdrop of uniformly bad eurozone data – unemployment stuck at a record high, retail sales down and consumer and business confidence sinking.
Analysts said the figures showed that the eurozone economy contracted in the last quarter of 2011.