x Abu Dhabi, UAEFriday 21 July 2017

Fall in US jobless claims sparks rally

Fewer jobless claims and more factory orders lift Wall Street futures and European stock markets.

Asian stocks closed higher for the sixth session in a row. AP Photo
Asian stocks closed higher for the sixth session in a row. AP Photo

A decrease in US jobless claims helped to buoy Wall Street futures and European markets yesterday.

Jobless claims in America fell by 12,000 to 409,000 in the week ended August 27, US labour department figures showed.

The positive data helped to lift the Standard & Poor's (S&P) 500 index futures up 0.1 per cent to 1,218.60 in early New York trading. The benchmark Stoxx Europe 600 index was up 0.2 per cent at 237.9. The gains came before the release of a report expected to show US manufacturing shrank for the first time in two years.

Earlier, Asian stocks closed higher for the sixth session in a row.

The MSCI Asia Pacific Index advanced 0.3 per cent to 125.32.

The rally followed a dip of as much as 8.6 per cent last month, the most since May last year, as investors sold stocks amid concern the world economy may be cooling.

Japan's Nikkei 225 Stock Average increased 1.2 per cent. Australia's S&P/ASX 200 rose 0.3 per cent, Hong Kong's Hang Seng Index rose 0.3 per cent and South Korea's Kospi Index closed little changed.

Helping to stoke the rise was the release yesterday of China's purchasing managers' index (PMI) data, showing business activity rose last month from a 28-month low in July. Although positive, the increase was just below analyst expectations.

In the US, positive data was released the previous day showing orders placed with US factories rose by the most in four months. Business activity in the US expanded last month at a faster pace than forecast, a separate report showed.

The recovery in markets in recent days has been underpinned by speculation the Federal Reserve may be poised to deploy fresh economic stimulus measures when policymakers gather this month. The Fed discussed how to bolster the country's recovery and private-sector hiring at their last meeting on August 9.

"While the Fed's rhetoric has had a calming effect on financial markets so far, the recent sense of normality will be challenged by data releases for August and September," BNP Paribas wrote in a note yesterday.

The top performers in Asian stocks were exporters such as machinery makers as expectations rose that shipments to the US may pick up.

James Hardie Industries, a building materials supplier, increased 3.5 per cent in Sydney. Li & Fung, a supplier of toys and clothes to the US retail giant Walmart, surged 5.7 per cent.

European stocks recovered after earlier sliding following the release of disappointing euro-zone manufacturing PMI data for last month. The reading slipped to 49 from 50.4 in July.

German, French and Italian manufacturing PMIs all failed to hit forecasts. European stocks had been rising in recent days after worries about global growth eased. Anxieties have been stoked by S&P's downgrading of the US's top-notch credit rating and anxiety the euro-zone sovereign debt crisis may deepen.

tarnold@thenational.ae