European stock markets closed higher yesterday as a technical rebound following recent sustained losses got a boost from better-than-expected US jobs figures, dealers said.
They said that after a run of outright bad US data, investors were surprised when the latest US new jobless claims fell to 473,000, beating most forecasts for 485,000, but cautioned that the underlying employment picture remained weak.
A recovery overnight on Wall Street from sharp early losses despite a dire US new homes sales report helped Asia do better, with Europe then following in turn.
Dealers said the tone remained very cautious, however, with markets braced for a sharp downgrade – to around 1.4 per cent from the initial 2.4 per cent – in revised US second quarter growth figures due today.
Should the revision be any worse, fears that the US economy risks falling back into recession would gain ground, putting markets firmly on the defensive.
In London, the FTSE 100 index of leading shares closed up 0.91 per cent at 5,155.84 points. In Paris, the CAC 40 rose 0.72 per cent to 3,475.03 points and in Frankfurt the DAX added 0.22 per cent to 5,912.58 points.
Dealers said a solid German household confidence report buoyed nervous investors, with Europe’s powerhouse economy helping its weaker peers along, as in Spain which confirmed its recovery from recession with 0.2 per cent growth in the second quarter.
At the same time, the gains were largely a technical rebound after sustained losses and so will be vulnerable to any unpleasant surprises, as in the US data due today, they said.
Michael Hewson, market analyst at CMC Markets, said investors were adjusting positions and the jobless claims report helped provide some support but the employment market still remains weak.
“However ... this looks like nothing more than a technical rebound ahead of (today’s) figures,” Mr Hewson said.
In New York, the blue-chip Dow Jones Industrial Average was off 0.11 per cent at around 1600 GMT but holding above the key 10,000-points level it breached on Wednesday, while the tech-rich Nasdaq Composite was off 0.18 per cent.
“When it comes down to it, the claims data provided more of the same in the sense that it continues to suggest hiring activity is not picking up to any great degree even if the number of layoffs has stabilised,” said Patrick O’Hare, analyst at Briefing.com.
“The fundamental message of the report ... is that initial claims continue to run at a level that is not commensurate with a strong pickup in job growth,” Mr O’Hare said.