US Non farm payroll fuels gains but consumer confidence plummets

After a fairly lacklustre morning the markets snapped back into action jumping up on the better than expected employment report from the US.

The non-farm payrolls were expected to add a further 93,000 jobs in November, following October’s pre-revised data of 171,000. Unemployment was expected to remain steady at 7.9%. The actual data that came through showed that US non-farm payrolls rose by 146,000 in November whilst the unemployment rate dropped to 7.7%. This is the lowest unemployment figure since December 2008.

Although analysts were expecting a negative impact from super storm Sandy, this didn’t really materialise. Overall the trajectory of the US economy and labour market has not changed for the time being, although this might not be the case with the fiscal cliff looming. Businesses that may have been looking to hire, might just put it off and see the outcome of the fiscal cliff talks before taking on additional workers or making new investments.

This was just the boost Europe needed after the downbeat outlook from the ECB yesterday and this morning the German Bundersbank also cut its outlook for the coming year for Europe’s largest economy. The Bundersbank said it now expects growth of 0.4% next year, down from its previous estimate of 1.6%. It also said that unemployment could edge up to 7.2% from the current 6.8%.

If the powerhouse of Europe is struggling to cope with current conditions then there is little hope for the rest of Europe. However, Germany is well positioned to benefit from improvements in the global economy due to its companies strong export focus. Despite a strong year for the DAX which has risen by 28% this year, it remained in negative territory this afternoon.

Here in the UK miners were among the biggest gainers after the good news from the US which helped push commodity prices into positive territory, Kazakhmys and Rio Tinto both gaining over 1%. Oil stocks were also firmer as oil also reversed earlier losses.

Going into the close the markets took a turn for the worse as US consumer confidence sentiment came in worse than expected. A reading of 82 was forecast, however, the actual level was considerably lower at 74.5, indicating that Americans outlook on the economy and their finances had taken a turn for the worse. This is no doubt linked to the fiscal cliff talks stalemate which is causing anxiety.