World stock markets down despite dramatic surge in US jobs creation

Stock markets mostly fell on Friday on profit-taking despite data showing a surge in US jobs creation. Equities largely bounced back this week after heavy falls triggered by worries about the economic fallout from China’s deadly coronavirus.

“US stocks are lower in early action, despite a stronger-than-expected January labour report, as investors take a breather to reassess after a string of four-straight days of solid gains,” analysts at Charles Schwab brokerage said in a statement.

Wall Street street stocks opened lower after having finished at at fresh records again on Thursday, with the Dow slipping 0.4 per cent in the first minute of trading.

US employers added 225,000 new non-farm jobs last month, far surpassing expectations, thanks to big gains in construction and leisure and hospitality, While the unemployment rate ticked higher, this was due to more people entering the labour force.

Analyst Patrick O’Hare said that with the US market rising nearly 4 per cent this week it was likely due a period of consolidation in any case.

“The key takeaway from the report is that employment conditions remain in that sweet spot of being encouraging on the hiring front and encouraging on the inflation front in that average hourly earnings growth isn’t accelerating sharply enough to provoke imminent rate-hike concerns,” he said.

Strong US data, Chinese financial support and a broadly healthy earnings season had provided a much-needed boost to equities this week after last week’s sharp sell-off. Meanwhile there is a sense that the global economic impact of the virus outbreak could be limited.

China’s decision Thursday to halve tariffs on $75 billion of US goods as part of their trade detente also cheered the mood.

Observers say the virus, which has killed more than 600 people and infected 31,000, will batter Chinese growth in the first quarter but it could rebound later in the year, as it did after SARS.

“If the pattern of the SARS impacts are a guide, there is the potential for the Chinese economy to rebound with an above-potential growth rate once the outbreak subsides,” said T. Rowe Price analyst Chris Kushlis.

“In 2003, China’s growth rate climbed to 15.5 per cent in the third quarter as pent-up demand saw consumption rebound as the SARS outbreak waned.

“A similar rebound following the coronavirus could help keep the longer?term track of the Chinese economy on a relatively even keel,” Kushlis added.

Oil also fell Friday, as Russia said it would decide within days whether to back output reductions with its Opec partners to counter a weakening of crude prices amid the spreading coronavirus.

Energy Minister Alexander Novak’s announcement came a day after Russia rejected proposals to slash crude output at an Opec+ meeting, media reported, and asked instead for more time to assess the virus’ impact on the world economy and demand for crude.

They already have a production cut agreement in place, but Saudi Arabia and others have called for additional rapid cuts to support the oil price which stands close to 20 per cent lower than a month ago.

Wall Street was set to ease from record highs at the open on Friday as investors assessed the US employment report for January that showed acceleration in jobs growth but included a downward revision to certain previous numbers.

Nonfarm payrolls increased by 225,000 jobs last month, the Labour Department’s data showed, much higher than 160,000 jobs additions expected by economists polled by Reuters.

However, the economy created 514,000 fewer jobs between April 2018 and March 2019 than originally estimated. The biggest downgrade to payrolls over a 12-month period since 2009.

“Where the market is right now, it likes to see an economy that’s not too hot and not too cold because a much stronger economy suggests higher interest rates,” said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

A four-day run has put the S&P 500 on course to wrap up its best week in eight months as investors took comfort from China’s efforts to contain the spread of coronavirus and limit the economic damage from the outbreak that has killed more than 600 people. The new infections in mainland China on Thursday were down from Wednesday and Tuesday’s figures, but experts warned it was too early to identify a trend.

At 9:00 a.m. ET, Dow e-minis were down 112 points, or 0.38%. S&P 500 e-minis were down 11.75 points, or 0.35% and Nasdaq 100 e-minis were down 42.5 points, or 0.45%.

More than 300 S&P 500 companies have reported fourth-quarter results so far, of which about 70% have topped earnings estimates, according to IBES data from Refinitiv.

Take-Two Interactive Software Inc slumped 9.3% after the videogame publisher missed estimates for quarterly adjusted revenue. AbbVie Inc gained 3.2% after the drugmaker forecast 2020 earnings above analysts expectations.

Uber Technologies Inc shares gained about 6.2% after the ride-hailing company moved forward by a year its target to achieve a measure of profitability to the fourth quarter of 2020.

Reuters