US stock markets rally as fresh jobs data eases recession fears – but London still on edge

US Stocks rallied yesterday after jobs data eased fears about a slowdown in the world’s largest economy.

There were fewer weekly jobless claims than forecast, which reassured markets after employment figures on Friday sparked a global market sell-off.

But analysts warned that there is more turmoil to come as stock market indexes dipped in London and Tokyo.

Matt Britzman, a senior equity analyst at broker Hargreaves Lansdown, said: ‘Markets may have simmered down but this rollercoaster week isn’t over yet.’

Official data yesterday showed that there were 233,000 initial jobless claims in the US in the week to August 3, down from 250,000 a week earlier and fewer than predicted by economists.

The S&P 500 added 1.8 per cent, the Dow Jones Industrial Average rose 1.3 per cent and the tech-heavy Nasdaq Composite jumped 2.6 per cent.

But last week, figures revealed that American employers added just 114,000 jobs in July compared to forecasts of 185,000, and unemployment was the highest since October 2021.

That prompted a huge global sell-off on Monday amid fears that the US Federal Reserve has left it too late to cut rates and achieve a ‘soft landing’ for the economy.

It continued to impact trading in London where the FTSE 100 index closed 0.3 per cent down after falling as much as 1.2 per cent earlier in the day.

‘The FTSE 100 gave back a big portion of the gains chalked up on Wednesday as global markets remain jittery after the recent sell-off,’ said Russ Mould at broker AJ Bell.

Alongside concerns about the health of the US economy, a surprise interest rate hike in Japan accelerated the market turmoil. Investors borrowed yen while Japanese interest rates were low, essentially giving them free money to pump into stocks and riskier investments.

But the Bank of Japan raised rates last week for just the second time in 17 years, hiking its benchmark to 0.25 per cent and increasing borrowing costs. 

That left traders scrambling to offload their investments and pay their debts – contributing to the huge stock market sell-off seen earlier this week. 

Toyko’s benchmark Nikkei 225 fell 0.7 per cent, meaning it is 7 per cent down over the last week. It comes after the Japanese stock market suffered its biggest one day drop since 1987 on Monday.

Rob Burgeman, senior investment manager at wealth manager RBC Brewin Dolphin, said: ‘Is this a harbinger of doom? Probably not. It is never a comfortable experience to see sharp falls in share prices, but, in this instance, we think it is more to do with distressed, forced sellers than it is a wider economic issue.’

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