Stock markets

China closes 2% higher but other markets fall after US jobs data – as it happened

Investors have been buoyed by the People’s Bank of China’s decision to boost the yuan for the first time in nine days. US jobs showed stronger than expected growth, prompting rate hike talk
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Stock information at a brokerage house in Shanghai: markets on Friday were volatile after Beijing ditched a circuit breaker that halted trading twice this week.
 Stock information at a brokerage house in Shanghai: markets on Friday were volatile after Beijing ditched a circuit breaker that halted trading twice this week. Photograph: Aly Song/Reuters
 in Sydney,  and  (now)

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And in Europe the FTSEurofirst 300 fell 7% over the course of the week, marking its worst weekly performance since August 2011 amid the eurozone crisis.
On that, gloomy, note it’s time to close the blog after what has been a tumultuous week. Thanks for all your comments, and we’ll be back on Monday to cover all the week’s financial developments.
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To add to the New Year market gloom, the FTSE 100 has made its worst weekly start to the year since 2000. The Dow Jones Industrial had already recorded its worst ever 4-day opening at the start of the year and the modest rise so far on Friday is unlikely to improve things, unless there is a major revival before the close.
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European markets end a bad week on a low note

A poor week for global stock markets finished in negative fashion despite earlier hopes of a recovery. The volatility and chaos caused by disappointing Chinese data and the failed attempt to control the country’s stock market with circuit breakers had sent investors running for the hills this week. But a 2% rise in the Chinese market earlier on Friday, following the abandonment of the circuit breakers and some support from the authorities for the yuan, gave some hope that a better day was in prospect.
Better than expected US jobs figures put an end to that, prompting talk of further US rate rises and pushing the dollar higher, and by extension the oil price lower. With all the other geopolitical problems - North Korea’s possible hydrogen bomb, tensions between Saudi Arabia and Iran - as well as Chinese inflation data this Saturday, traders decided to take their money off the table ahead of the weekend.
Market analyst Tony Cross at Trustnet Direct said:
A degree of calm in Chinese markets overnight has done little to placate sentiment, whilst better than expected employment data out of the US is also adding to woes. As global growth projections are trimmed whilst the Federal Reserve eyes the next interest rate hike, across the board it seems as if the economy will now face sustained headwinds.
So Brent crude is currently down 1.6% at $33.18 a barrel, pushing commodity companies lower again. 
The FTSE 100 has lost nearly £85bn in value this week, recording its biggest weekly fall (5.28%) since August last year when the Chinese (yes, them again) sent ructions through global markets by devaluing the yuan.
According to CNBC, the global market as measured by the S&P Global Broad Market Index has lost more than $2trn this week. The final scores for the day showed:
  • The FTSE 100 fell 41.64 points or 0.7% to 5912.44
  • Germany’s Dax dropped 1.31% to 9849.34
  • France’s Cac closed down 1.59% at 4333.76
  • Italy’s FTSE MIB lost 1.58% to 19,869.49
  • Spain’s Ibex ended 1.66% down 8909.2
  • In Greece, the Athens market is 0.81% lower at 585.98
On Wall Street the Dow Jones Industrial Average is currently up 62 points or 0.38%.
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One of the reasons for the decline in markets since the initial enthusiasm for the US jobs data is the feeling that the strong figures make a rate rise more likely. The disappointing wages growth might mitigate against an early rise, but the general feeling seems to be that even dearer borrowing costs are now more likely. Chris Beauchamp, senior market analyst at IG, said:
Heading into the close, the FTSE 100 has given up all its gains for the day, finishing a tough week on a miserable note.
After a passable performance overnight for the Chinese market, hopes were high that stock markets in Europe and the US could claw back some of their own losses. So far on this side of the pond, that has not been the case.
Equity traders have been left bereft of reasons to be optimistic this week, and it looks like the China fears of the past few days will remain with us as we head into a new week. US job numbers kicked off 2016 in fine form, well ahead of estimates, but the lack of wage growth was the fly in the ointment. The fear now is that such good numbers, even with inflation worries, will encourage the Fed to continue with its planned four hikes this year, putting fresh pressure on equity markets.
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Larry Elliott 
Here’s our economics editor Larry Elliott on the US jobs data:
It seems just like the good old days. Almost 300,000 jobs were added to payrolls in America in the last month of 2015, continuing the upward trend of recent months. The US is once again living up to its reputation for being a gigantic jobs machine.
Well, perhaps. Jobs are certainly being created at a good lick and the US has an unemployment rate – 5% – that the eurozone, at 10.5%, would die for. There are signs that people who had given up hope of finding work are being encouraged back into the labour market.
Inevitably, this will lead to speculation that the Federal Reserve has left it too late to start raising interest rates and will now be forced to play catch up with a more rapid increase in the cost of borrowing than Wall Street is expecting. There is already talk of the Fed repeating December’s rate hike in March.
The markets may be getting ahead of themselves. Employment and unemployment are lagging indicators: they provide a guide to what has happened to an economy in the past rather than what is happening now or what will happen in the future. Some of the forward-looking indicators – for manufacturing, for example – have been worryingly weak.
The Fed will certainly be looking closely at the rate of job creation in the US, but it is equally interested in what is happening to wages. And the story here is that pay pressures are extremely muted. Average hourly earnings were flat in December and were up by just 2.5% over the year as a whole, a much weaker outcome than Wall Street had been anticipating. 
His full analysis is here:
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Markets are flagging after the initial burst of enthusiasm following the US jobs data. On Wall Street the Dow Jones Industrial Average is now up 51 points, the FTSE 100 is just 2 points higher while Germany’s Dax is down 42 points.
Connor Campbell, financial analyst at Spreadex, said:
Initially buoyed by a bombastic non-farm figure the global indices couldn’t sustain their surge, the US open ending up not being the white knight the European markets were looking for.
Perhaps the superb non-farm figure (at 292,000 against the 203,000 expected and an upwards revised 252,000 last month) was tempered by falling wage growth (at 0.0% against the 0.2% forecast) and an unchanged unemployment rate. Or perhaps investors aren’t willing to take too much risk into the weekend, especially with the prospect of another awful start to Monday on the cards. Either way the Dow couldn’t manage to match the gains its futures were promising, at points flagging in the same way the European indices have done for much of the day. 
Chinese inflation figures are due over the weekend which could prompt further market ructions next week, given what has happened in the past few days.
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Here’s something to put the latest US jobs figures in context:
— Lawrence McDonald (@Convertbond)January 8, 2016
US Unemployment Rate Dec 2015: 5% Dec 2007: 5% Full Time Jobs 2015: 122.8m 2008: 123.2m Population +15m BLS data (2)
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Back with China, and here’s a graphic showing all the recent intervention in the country’s stock market:
Chinese intervention in the stock market.
 Chinese intervention in the stock market. Photograph: RBS Macro Credit Research: Bloomberg
— StockTwits (@StockTwits)January 8, 2016
What else can the PBOC do? 🤔 How China has intervened in its stock market: https://t.co/EzMRSeYKRf $ASHR $FXI pic.twitter.com/1grfJwMHMq
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IG’s Joshua Mahony is not surprised by the fluctuations in the dollar following the non-farm payroll report:
— Joshua Mahony (@JMahony_IG)January 8, 2016
That dollar rally didnt last too long. Fully expected to see any big move revert back to square one as is so often the case on jobs day #NFP
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But not everyone agrees. Economist Nina Skero at the Centre for Economics and Business Research does expect a US rate rise, but perhaps not until the third quarter of the year:
Overall, the data add to the view that the US economic recovery steams ahead as wage gains and the unemployment rate approach long-run norms and as job creation figures, which admittedly can be rather volatile, remain high.
In the aftermath of December’s historic Federal Open Market Committee decision and this week’s data releases perhaps the question on the minds of many is what is the future of US monetary policy? It is important to keep in mind that as one swallow does not a summer make, one rate hike does not a normalized monetary policy make. Even with the December rise interest rates in the US remain low and although the committee has restated its intention to maintain an accommodative monetary policy, it is reasonable to expect further hikes in 2016 – an expectation further strengthened by today’s strong labour market data.
However, this is not to say that sources of risk which could slow down the recovery do not exist, both domestically and globally. Today’s labour-market release shows a participation rate of 62.6% - well below pre-crisis levels. On the global front, equity markets turmoil and the slowdown in China are among the greatest concerns.
The exact pace and extent of further interest rate hikes is difficult to predict given that the FOMC itself maintains that it is data-dependent and that it will continue to make interest rate decisions based on a series of indicators that it is monitoring rather than on a pre-set schedule.
Keeping in mind that the US economy is expected to perform strongly in 2016, but also that December minutes show that the FOMC wants to observe the potentially delayed impact of the rate rise before making further hikes, Cebr expects interest rates to rise to 0.75% in the third quarter of 2016.
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