US jobs boost triggers FTSE buying spree

Global markets rallied on Friday afternoon, as surprisingly strong US jobs figures encouraged cautious investors back to a market that has this week benefited from a string of improved economic signals.

The UK’s FTSE 100 index, which made small gains this morning, shot up, ending the day 105 points or 1.81% stronger at 5,901, a new 2012 high. That’s a weekly gain of 2.9% for the blue chip index, or 5.95% since the start of the year.

American officials said 243,000 jobs were added to the economy – well above expectations – while the jobless proportion fell to 8.3%, a low not seen since 2009.

The closely scrutinised figures, which tend to exert a strong force on markets, were deemed unanimously positive in economists’ post-mortems. Julia Coronado of BNP Paribas commented: 'While recent data have been mixed, it appears that the US economy may be maintaining the momentum it had built in H2 rather than seeing that momentum fade. This is consistent with the global data flow that has shown an upturn in manufacturing and confidence.'

Economists said that the data mean the US Federal Reserve has less reason to add more liquidity via another round of quantitative easing.

'With the labour market playing such a pivotal role in the Fed’s monetary policy strategy, the commitment of the Federal Reserve to keeping rates on hold until at least late 2014 is looking hard to take too seriously,' said Rob Carnell of ING Bank.

US markets rose higher after the data, with the S&P 500 up 1.3% to hit 1,343 and the Dow 1.1% higher at 12,846.

Angus Campbell, head of sales at Capital Spreads, said: ‘As soon as the number was released investors rushed in to buy just about anything they could put their hands on. Those people who’ve been sitting on the side lines up until now were finally tempted to commit to stocks.’

Market-watchers, however, still caution that the global economy remains in danger, with a deal for Greece’s second bailout tranche still to be agreed. ‘With housing still in the dumps, fiscal policy being tightened and the euro-zone crisis likely to flare up again at any moment, we still think the US will endure another year of weak growth in output and employment,’ noted Capital Economics.