Strong employment data from the US was not sufficient to lift markets from their Eurozone doldrums this afternoon, with Wall Street pushing lower despite signs that the long-moribund US employment market is finally on the road to recovery.
The Eurozone crisis is, it seems, all-powerful at present. Just days into 2012, it feels as if nothing has changed from 2011. Indeed, nothing really has.
A double-whammy of good US data on employment failed to provide any lift to markets, as the downtrend remained intact for a second day.
By 3.30pm (London time), the Dow Jones was down 0.6% at 12,337, while the S&P 500 was down 0.44% at 1271.72. In London the FTSE 100 fell 0.47% to 5641.44, having been as low as 5614.38.
US labour market improves
Today saw a relatively rare occurrence - the release on the same day of both the ADP employment report and the weekly US unemployment claims figures.
The ADP data is traditionally released on the Wednesday before non-farm payrolls, but this week’s New Year holiday meant that the release date was pushed back by one day.
The figure from ADP, a payroll services company, surpassed all expectations, surging past economists’ forecasts to record a gain of 325,000 jobs in December.
The forecast had been for an increase of just 175,000, which would have been a decline from the 204,000 jobs added in November.
The December increase was the largest single rise since 2001, and bodes well for the non-farm payrolls report released tomorrow. This expects the US economy to have added 150,000 jobs during the final month of 2011.
A revival in the US labour market has been one of the most fervent hopes of global markets over the past year. The comes as increased employment will spur greater spending by Americans, breathing new life into manufacturing and other industries in the US and around the world.
Debate rages about whether the ADP report is a useful precursor of the non-farms data, and there are strong arguments on both sides, but it is worth nothing that the ADP and non-farm numbers exhibit a fairly high correlation. Therefore, today’s data augurs well for non-farms tomorrow, widely seen as one of the most important data points in any month.
Meanwhile, initial claims were also slightly better, coming in at 372,000 for last week, below the forecast 375,000 level. This figure has recently begun to remain solidly below the 400,000-per-week level, which is seen as an important watermark between an improving and deteriorating US labour market.
Euro in freefall
Spread betting markets have registered modest losses today, but the real damage has been in forex, where the euro has dived more than 1% against the US dollar.
The single currency plumbed depths not seen since September 2010, as a combination of peripheral economic worries and a poorly-received French bond auction (which saw yields rise and demand nearly halve compared to the last auction) hit investor confidence.
Retailer roll-call
The flow of post-Christmas updates from the retail sector has continued today in London, with JJB Sports, Clinton Cards and Games Workshop all issuing their traditional New Year trading update.
Clinton Cards rose 3.2% to 11.36p after some modest improvement in like-for-like (LFL) sales for the end of 2011. Investors seemed to be cheered by the prospect of a strategic review, but the company still has a significant overhang of debt that needs to be cleared.
JJB Sports leapt 30% to 7.24p (still down 83% for the year, however) as LFLs rose 5%, in line with expectations, over the Christmas period. However, it should be noted that gross margins fell 3.2% over the same period, indicating that much of the improvement in sales was due to heavy discounting.
Games Workshop, the tabletop wargaming company, saw revenue and pre-tax profits improve in its first half.
The company adding that its somewhat niche environment (it deals chiefly in fantasy wargaming) meant it was fairly insulated against the various macroeconomic travails afflicting the global economy.
Shares in the company cantered 11% higher, to an aesthetically-pleasing 500p.
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'Euro Spread Betting Markets Plunge on Poor French Bond Auction', Article by IG Index, last update: 5-Jan-12
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