US markets rally as unemployment rate drops to 7 8

After a firm but fairly uninspiring morning in Europe, the markets were given fresh legs for the afternoon after the US September employment report saw the unemployment level fall under 8% for the first time since Obama became President.

The actual US unemployment rate came in at 7.8%. However, almost more importantly, the August numbers had a massive revision from 96,000 to 142,000 new jobs added. These are exactly the results President Obama would have been hoping for in the penultimate jobs report before the elections on November 6.

As a result US markets have rallied on the open, with nine Dow Jones components hitting 52-week highs and the Dow Jones also trading at its highest inter day point since December 2007.  European markets, which were waiting patiently for the data, also rallied. These figures are so important because the US is the biggest economy in the world and if the consumer is getting more money to spend on goods, this can help drive global trade forward. In Europe the DAX has added 1.3%, the CAC 1.65%, whilst the FTSE 100 is lagging slightly up 0.65% as we head into the close.

However, the market’s reactions may seem a little excessive; although a good result it doesn’t change the global economic backdrop with China’s economy slowing and Europe still trying to navigate its way out of a massive debt crisis.

Risk sensitive sectors such as banks and resource firms led the indices higher. Mining firms ENRC, Kazakhmys and Evraz were all trading over 4% higher.

On the negative side Tesco’s continued to sell off after reporting its half-year figures earlier in the week. After starting the close to 340p the suffering supermarket finished down at 311p, shedding over 8% in the last three trading sessions.

It has been a welcome change for the US to take the headlines after Europe has been the driving force behind the markets all week. With non-farm payrolls taking the lead today, the markets have momentarily forgotten about Spain and its insistence that a bailout is not necessary. With no data due out of the US on Monday we can be certain that eyes will be back on Europe on Monday.