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Thursday 21.00 BST: US stocks lost momentum at the end of the global session after rising earlier, supported by a buoyant monthly consumer spending report that partly compensated for disappointing first quarter economic growth.
US consumer spending increased by 0.9 per cent in March, up from 0.5 per cent in February, the biggest jump since mid-2009, rekindling confidence in the US economy after lacklustre first quarter GDP growth.
Investors were cautious, however, ahead of Friday’s monthly US non-farm payrolls figures, which were expected to show a decrease in joblessness in April.
Boding well for the monthly employment report were details from the Institute for Supply Management’s April survey of US purchasing managers. The ISM index showed a better than expected gain to 54.9 in April, up from 53.7 in March, driven by the employment component of the index, which hit a four-month high.
James Knightley at ING said: “Given the headline reading is at levels historically consistent with GDP growth in excess of 3 per cent it offers encouragement to the view that second-quarter GDP growth should rebound strongly after Wednesday’s disappointing first-quarter outturn.”
After rising earlier, the Dow Jones Industrial Average and S&P 500 both closed marginally lower. The Nasdaq Composite rose 0.3 per cent. Ten-year US Treasury bond yields were down by four basis points to 2.61 per cent after the US Federal Reserve expressed confidence in the US economic recovery.
Long-dated Treasury bonds also remained in vogue ahead of Friday’s employment report. The yield on 30-year bonds touched a new low for the year at 3.43 per cent, a level last seen in June.
A day ahead of the non-farm payrolls, analysts surveyed by Bloomberg expected 215,000 jobs to have been created in April, while the unemployment rate is seen edging back to 6.6 per cent.
The dollar, however, remained under pressure, with the euro climbing 0.1 per cent to $1.3874 against the US currency.
Analysts suggested that a forecast-beating jobs report would do little to convince investors that the Fed would move to raise interest rates any time sooner than current expectations.
“The Fed is now assessing a broader series of labour market indicators,” said Robert Lynch at HSBC. “Its underlying objective of achieving ‘full employment’ is a long term process, not a one-report event, and markets will be hesitant to draw sweeping policy conclusions.”
Sterling added 0.1 per cent to $1.6886, having earlier hit a five-year high of $1.6920, thanks to positive manufacturing data. Manufacturing output rose 1.3 per cent in the first quarter, following an increase of 0.6 per cent in the final quarter of last year.
With most European bourses shut for the May Day public holiday, better underlying profit at Lloyds Banking Group ensured the financial sector drove London’s FTSE 100 higher. The London benchmark index closed 0.4 per cent higher, with Lloyds shares leading the rally, up 5.5 per cent. Lloyds also delivered the market some welcome news on its TSB unit, saying it would launch a flotation of at least a quarter of the business in the next eight weeks.
Most Asian markets were closed for the May holiday, though Japanese equities marched ahead, with the Nikkei 225 average gaining 1.3 per cent and the wider Topix advancing 1.7 per cent. The upward moves followed the after-the-bell release of mixed earnings statements from several Japanese banks and airlines on Thursday, including Nomura and ANA Holdings, the parent of All Nippon Airways.
Sydney’s S&P/ASX 200 fell 0.7 per cent, in spite of the release of data suggesting that business conditions were improving for factories in China, Australia’s largest trading partner. The Australian dollar fell 0.1 per cent to $0.9275 versus its US counterpart.
China’s state-sponsored purchasing managers’ index for the manufacturing sector ticked up from 50.3 in March to 50.4 in April, with a reading above 50 indicating expansion.
Analysts at ANZ said the official report “reflects that a cyclical upturn is under way supported by the recent pro-growth targeted policies, and suggests that China’s growth momentum is stabilising”.
On commodity markets gold fell 0.7 per cent to $1,285.10 a troy ounce after touching its lowest price since February earlier in the day.
In the oil markets, the US crude benchmark Nymex WTI fell a further 0.6 per cent to $99.19 a barrel after losing 1 per cent in the previous session following data that showed a large build-up of inventories in the US last week.
Brent crude fell 0.3 per cent to $107.82 per barrel.
With additional reporting by Vivianne Rodrigues in New York
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