The FTSE 100 has jumped as investors go into the weekend in a joyous mood after the US economy added 2.5m jobs in May and the European Central Bank (ECB) ramped up its stimulus measures.
The blue-chip index was up two per cent at 6,468 points in afternoon trading. It put the FTSE 100 on track for a huge gain of more than five per cent this week.
Wall Street’s Dow Jones index rocketed 2.7 per cent higher in early trading in the wake of the jobs numbers. The S&P 500 was up 2.2 per cent and the Nasdaq had climbed 1.6 per cent.
European markets moved even higher, having been lifted by more stimulus from the Eurozone’s central bank. Germany’s Dax jumped three per cent and France’s CAC 40 surged 3.4 per cent.
The US unemployment rate fell to 13.3 per cent in May, figures showed today. This confounded analysts who were expecting a surge to almost 20 per cent. It stood at 14.7 per cent in April.
European stocks were boosted by further stimulus from the ECB yesterday. The Bank added €600bn (£560bn) to its bond-buying programme, taking it to a colossal €1.35 trillion.
Shock US jobs number lead to stock market rally
The jobs figures, which showed 2.5m Americans found work last month, astounded analysts. The consensus prediction was for another surge in unemployment.
Naeem Aslam, chief market analyst at trading platform Avatrade, said: “This is a mind-blowing number and shows that the economy is improving. Things are not as bad as many thought.”
Robert Alster, head of investment at wealth manager Close Brothers Asset Management, said: “From a political standpoint the White House will see these job numbers as a welcome distraction from the recent US-wide protests.”
Demonstrators have been on the streets for more than a week to protest the police killing of black man George Floyd.
Yet Melanie Baker, senior economist at Royal London Asset Management, said economic stimulus is still needed.
She said the unemployment rate, which remains at its highest since the 1930s, is “awful”. “Ongoing policy support is still very much needed… and payrolls are still a long way below pre-crisis levels.”
Investors heartily welcomed the figures. Travel firms led the rally in US stocks on the Dow Jones, just as they did on the FTSE 100, as countries drew up plans to reopen their borders.
American Airlines surged 25 per cent. United Airlines and cruise firm Carnival both jumped more than 17 per cent.
Travel stocks boost FTSE 100
On the FTSE 100, stocks that were neglected in the early days of the recent rally continued to outperform. Travel firms in particular did well.
British Airways-owner IAG surged 12 per cent. Cruise firm Carnival jumped 17 per cent while airline Easyjet rose seven per cent.
The rally in travel stocks came after European countries such as Turkey, Greece, Spain and Portugal said they were keen to open “travel corridors” to the UK.
Luca Paolini at Pictet Asset Management: “We have raised exposure to a number of cyclical sectors that have been hit particularly hard by the market sell-off.”
Yet Paolini expressed doubt about the rally, with FTSE 100 having surged almost 30 per cent since late March.
“The stock market’s extraordinarily strong rebound is out of step with economic reality,” he said.
“Globally, central banks’ monetary stimulus has boosted nearly all fixed income sectors,” he added. “But some now look expensive and we need to be discerning.”
Dollar rises on currency markets
On the currency markets, the dollar halted its recent fall. It rose strongly amid the better-than-expected jobs numbers, climbing 0.3 per cent on an index.
Nonetheless, the pound surged along with the FTSE 100. It was up 0.7 per cent against the dollar at $1.268.
“The dollar got its groove back against the euro and yen following the surprisingly strong nonfarm payroll report,” said Edward Moya, senior market analyst at currency firm Oanda.
Oil prices jumped. WTI crude, the US benchmark, climbed 4.5 per cent to $39.10 per barrel. Brent crude rose 5.1 per cent to $42 per barrel.
Moya said: “The economic recovery is already happening and that could do wonders for crude consumption.”
“Earlier crude was climbing higher after Opec+ signaled everyone is on board with extending supply quotas.”