European stock markets closed sharply higher yesterday as better-than-expected US jobs data added to early gains made on a more positive view of the European Central Bank’s stand on the eurozone debt crisis.
The ECB sparked a heavy global sell-off on Thursday when head Mario Draghi announced no immediate measures to bring down dangerously high borrowing costs for some eurozone states, disappointing markets primed for action.
However, by yesterday, analyst comment on Mr Draghi’s remarks had turned more positive, suggesting that the ECB and eurozone governments were gradually putting in place the framework for a lasting solution to the debt crisis.
News that the US economy created 163,000 jobs in July, compared with forecasts for just 100,000, gave an additional boost, driving sharp gains by late afternoon.
Combined, the two leads made a strong rally, with Thursday’s losses more than recovered.
In London, the benchmark FTSE 100 index of top companies was up 2.21 per cent at 5,787.28 points. In Frankfurt, the DAX 30 gained 3.93 per cent at 6,865.66 points and in Paris the CAC 40 jumped 4.38 per cent to 3,374.19 points.
Among other European markets, Madrid put on six per cent and Milan soared 6.34 per cent even though concerns remain that Spain and Italy may eventually need bailouts.
The European single currency jumped sharply to $1.2391 from $1.2178 in New York late Thursday.
In Asian trade earlier yesterday, stock markets closed mostly down, hit additionally by downbeat results from two of Japan’s biggest electronics firms, Sharp and Sony.
Tokyo fell 1.13 per cent, Seoul shed 1.11 percent and Sydney lost 1.12 per cent. Shanghai rose 1.02 per cent after China’s securities regulator said it would cut transaction fees on equity trading by 20 per cent from September 1.
Hong Kong slipped 0.12 per cent.
On Wall Street, the Dow Jones Industrial Average was up 1.82 per cent at around 1600 GMT and the tech-rich Nasdaq put on 2.11 per cent.
Investors welcomed the improvement in the US jobs data in July which showed the strongest gain since February.
“These are good data. Not great, but good,” said Dick Green at Briefing.com.
“With regard to the economic outlook, today’s report clearly supports our view that the US economy should expand at a faster pace in the second half of the year than it did in the first half,” UniCredit analysts said.
“Yesterday’s... selling helped remove some of the froth from risk assets ahead of today’s critical US jobs number,” said Spreadex trader David White.
He said many had been hoping for follow up action after Mr Draghi last week that the ECB would do whatever was needed to save the euro, but when no new measures were announced the markets reversed sharply.
Both the ECB and the Bank of England maintained current monetary policies at meetings Thursday, a day after the US Federal Reserve also held the status quo, disappointing investors hoping for new economic stimulus measures.
Gilles Moec at Deutsche Bank said the markets had got ahead of themselves and that Mr Draghi was in no position Thursday to announce anything concrete.
Instead, “Draghi went as far as he could, in our view, to indicate in no uncertain terms that massive ECB support would be available as soon as the potential recipient countries — presumably Spain and Italy — accept to trigger the European support procedure,” Moec argued.
“We think that the central bank has in reality changed the way the current sovereign turmoil should be seen,” he said, adding: “Draghi in our view is on his way to deliver on his promises from last week.”