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US jobs data weigh on stocks, euro below $1.40

By Pan Pylas

Associated Press

Published: Thursday, Sept. 8 2011 11:00 a.m. MDT

Jason Hardzewicz of Barclays Capital works on the floor of the New York Stock Exchange, Tuesday, Sept. 6, 2011, in New York.

Henny Ray Abrams, Associated Press

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LONDON — Soft U.S. jobs figures kept stock gains in check on Thursday despite hopes that global policymakers are readying measures to shore up economic growth. The euro, meanwhile, fell to its lowest level since July after the European Central Bank's chief indicated borrowing costs would not rise anytime soon.

Figures showing that jobless claims in the U.S. unexpectedly edged up 2,000 to 414,000 last week provided a further reminder that the world's largest economy is failing to generate enough jobs to get the unemployment rate down.

The rise in claims offset any encouragement generated by an unexpected narrowing in the U.S. trade deficit to $44.8 billion in July and a signal from the ECB that the current rate rise cycle has come to an end.

In Europe, the FTSE 100 index of leading British shares closed 0.4 percent higher at 5,340.38 while Germany's DAX rose 0.1 percent to 5,408.46. The CAC-40 in France was 0.4 percent higher at 3,085.83.

In the U.S., the Dow Jones industrial average edged down 0.1 percent at 11,402.35 while the broader Standard & Poor's 500 index shed 0.2 percent to 1,196.46.

The focus in the markets will turn later to President Barack Obama, who is expected to announce a $300 billion package of measures to boost jobs creation in the U.S.

There are hopes that the Federal Reserve will soon decide to provide the U.S. economy with another monetary stimulus. The previous $600 billion program, which ended in June, was widely credited for the stock market gains recorded in the first over the year and its ending has been blamed for the ensuing reverse.

Fed chairman Ben Bernanke is also speaking later and investors will be monitoring his speech to the Economic Club of Minnesota for any signs that monetary easing remains an option.

"Will he keep his monetary cards close to the vest...or, will he be more forthcoming with respect to the need for, and type of, stimulus," said Sal Guatieri, an analyst at BMO Capital Markets.

Concerns over the state of the global economy have combined with fears over Europe's debt crisis during the past month to send financial markets spinning. The repercussions of the recent turmoil are being felt in the actions of policymakers, most notably in the European Central Bank.

Instead of continuing on its policy of steadily raising borrowing costs, the European Central Bank's president Jean-Claude Trichet indicated that there won't be any more interest rate rises in the coming months given easing inflationary pressures and "intensified" risks to economic growth in the eurozone.

The bank has twice raised its benchmark rate by a quarter point since April, taking it up to 1.5 percent. That's helped support the euro in recent months despite worries over the debt crisis.

However, the prospect of no further rate hikes hit the euro, sending it back below $1.40. By late afternoon London time, the euro was down 1.2 percent below at $1.3925.

Earlier in the day, Asian shares posted modest gains. Japan's Nikkei 225 index rose 0.3 percent to close at 8,793.12 as a softening yen helped Japan's exporters. By late afternoon London time, the dollar was up 0.2 percent at 77.47 yen.

South Korea's Kospi rose 0.7 percent to 1,846.64, benefiting from a decision by the country's central bank to leave its benchmark interest rate unchanged for a third month. Higher interest rates generally drag on stocks by making them a potentially less attractive investment.

Hong Kong's Hang Seng fell 0.7 percent to 19,912.82 as did shares in mainland China — the benchmark Shanghai Composite Index fell 0.7 percent to 2,498.94 while the Shenzhen Composite Index lost 1 percent to 1,100.53.

Meanwhile, oil prices continued to edge up, with benchmark crude for October delivery up 18 cents at $89.52 a barrel in electronic trading on the New York Mercantile Exchange.

Pamela Sampson in Bangkok contributed to this report.

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