Stocks remain weighed down by weak US jobs data

AP News
Posted: Jun 06, 2011 11:57 AM
Stocks remain weighed down by weak US jobs data

Weak U.S. jobs figures continued to weigh on stock markets Monday as investors fretted about the state of the U.S. economy, while the euro remained relatively well-supported by expectations that Greece will soon receive another financial bailout to plug a potential funding gap over the coming two years.

Last Friday's figures showing that the U.S. economy generated only 54,000 jobs during May, a third of what was anticipated, sent shockwaves through stock markets and prompted a big dollar reverse. The data prompted renewed speculation that the U.S. Federal Reserve will maintain its super-loose monetary policy, including benchmark interest rates of near zero percent, for longer than previously anticipated.

A speech Tuesday from Fed chairman Ben Bernanke on the U.S. economic outlook could well be the market highlight of the week.

The payroll data often set the stock market tone for a week or two after their release so it's no surprise to see sentiment remaining fairly brittle, especially as the loss of momentum in the U.S. is being echoed elsewhere, notably in China.

"Investor sentiment remains concerned about growing evidence of cooling in global economic growth," said Neil MacKinnon, global macro strategist at VTB Capital.

In Europe, the FTSE 100 index of leading British shares closed up 0.1 percent at 5,863.16, while France's CAC-40 fell 0.7 percent to 3,863.40. Germany's DAX ended 0.3 percent lower at 7,084.57.

On Wall Street, the Dow Jones industrial average was down 0.1 percent at 12,142 around midday New York time, while the broader Standard & Poor's 500 index fell 0.4 percent to 1,295.

The other big theme in the markets, aside from the state of the U.S. economy, remains Europe's debt crisis.

However, last Friday's effective decision by the European Union and the International Monetary Fund to give Greece the next batch of bailout funds _ euro12 billion _ and to signal it may get a second bailout, have helped ease worries in the markets that the country will default on its mountain of debts soon.

The relief is particularly notable in the performance of the euro, which was trading near one-month highs of $1.4617. Earlier, it struck its highest level since May 5 at $1.4643.

It's also been evident in the rates Greece has to pay to borrow money in the markets. Since Friday's indications that the country has been granted more breathing room, the yields on Greece's 10-year bonds have fallen to below 16 percent.

Whether Greece can avoid a default down the line remains questionable, given mounting political opposition to the austerity measures being planned and seemingly daily demonstrations on the streets of Athens.

Despite the financial markets welcoming Friday's news, few, if any analysts, think the Greek problem has been solved.

"Certainly allowing Greece emergency funding now does remove the threat of imminent default, but as the summer progresses Athens will have to prove that it has earned future disbursements from the IMF/EU," said Jeremy Batstone-Carr, director of private client research at Charles Stanley.

A number of hurdles will have to be cleared, including getting private creditors to voluntarily roll over their debts, and the government making headway on its additional austerity and privatization measures.

Batstone-Carr highlighted the "considerable disquiet" in Greece regarding the possible sale of "crown jewel" assets.

Earlier in Asia, Japan's Nikkei 225 stock average slid 1.2 percent to close at 9,380.35, with shares of Tokyo Electric Power Co., the Japanese utility battling to bring a crippled nuclear power plant under control, plunging 28 percent.

The tumble comes a day after TEPCO acknowledged that 1,500 more tons of radioactive water were being moved into temporary storage at its Fukushima Dai-ichi nuclear power plant in an attempt to prevent a massive spill of contaminated water into the environment.

More than 100,000 tons of radioactive water have pooled beneath the plant in northeastern Japan since it was hobbled by an earthquake and tsunami on March 11.

Markets in Hong Kong, South Korea, Taiwan, New Zealand and mainland China were closed for holidays.

Growth worries weighed on oil markets, too, and a barrel of crude dropped below $100 again. Over the past couple of weeks, oil prices have hovered just above or below that level. Benchmark oil for July delivery was down $1.53 to $98.69 a barrel in electronic trading on the New York Mercantile Exchange.


Pamela Sampson in Bangkok contributed to this report.