August 04, 2012
World stocks rallied 2 per cent, US oil jumped nearly 5 per cent and the euro surged on Friday on news US employers increased hiring in July by the most in five months and on revived optimism that Europe was closer to action on its debt crisis.
Investors took a second look at Thursday's statement by European Central Bank President Mario Draghi and concluded that help was on the way, even though it would take more time than many hoped.
The Dow Jones industrial average rallied 217.29 points, or 1.69 per cent, to 13,096.17. The S&P 500 jumped 25.99 points, or 1.90 per cent, to 1390.99. The Nasdaq Composite added 58.13 points, or 2 per cent, to 2967.90.
The S&P 500 had fallen more than 1.5 per cent in the past four sessions as investor hopes for central bank stimulus measures faded. For the week, the Dow rose 0.2 per cent, the S&P gained 0.4 per cent and the Nasdaq rose 0.3 per cent.
It was the fourth straight week of gains for the S&P and Dow and the third for the Nasdaq.
Australian shares are likely to get a boost from from the overseas gains, with futures pointing to a rise of 58 points, or 1.4 per cent, to 4243 when trading resumes on Monday.
The dollar also rose sharply after the US jobs data release - it was at $US1.0568 this morning, up from $US1.05.
The ASX 200 benchmark share index ended the day down 48 points, or 1.1 per cent, to 4221.5 points, while the broader All Ordinaries index shed 47.1 points, or 1.1 per cent, at 4243. For the week, the ASX200 gained 0.3 per cent, notching its third consecutive weekly advance, its longest winning streak since January.
"A lot of market participants began to rethink yesterday's ECB statement and look at it from a more positive perspective. Overall, a lot of investors thought, 'maybe it's not as bad as it originally sounded,'" said Paul Mendelsohn, chief investment strategist at Windham Financial Services.
The US jobs report showed stronger-than-expected hiring but also a rise in the unemployment rate to 8.3 per cent, which keeps alive the hope of further support for the economy from the Federal Reserve.
The jobs data came at the end of a volatile week, packed with Fed and ECB policy meetings that disappointed those hoping for more aid for the US economy and Europe's debt-stricken nations.
"The employment numbers came in better than anticipated, and that added some positive fuel to the fire," said Ted Weisberg, a floor trader with Seaport Securities in New York.
The euro rose as high as $US1.2386 on Reuters data and was last up 1.7 per cent at $US1.2385, on track for its best day since the end of June. The US dollar gained 0.5 per cent against the yen, to 78.58 yen, after hitting a two-week high of 78.77.
The ECB indicated on Thursday it may start buying government bonds again to reduce crippling borrowing costs for Spain and Italy, but Draghi hinted that any intervention would not come before September.
Spain inched closer to seeking a sovereign bailout on Friday, but Prime Minister Mariano Rajoy said he needed first to know the conditions as well as the form any European Union rescue would take.
The MSCI world equity index was last up 2.0 per cent, while European shares ended 2.5 per cent higher.
The Federal Reserve on Wednesday sent a stronger signal that a new round of major support could be on the way if the recovery did not pick up.
In the oil market, NYMEX September crude settled at $US91.40 a barrel, jumping 4.9 per cent, front-month crude's biggest one-day gain since June 29. The unexpectedly strong US jobs growth in July sparked upbeat sentiment on the oil demand outlook.
Brent crude rose $US3.04, or 2.87 per cent, to settle at $US108.94.
Gold also climbed, with spot gold up 0.9 per cent at $US1604.10 an ounce.
US Treasury prices weakened on the labor data. The benchmark 10-year US Treasury note was down 30/32, the yield at 1.58 per cent.
Other US data showed the pace of growth in the vast US services sector edged up in July as new orders gained traction, but employment fell to its lowest level in nearly a year.