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Originally published January 8, 2010 at 3:34 AM | Page modified January 8, 2010 at 5:28 PM

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World stocks recover from US jobs disappointment

Stock markets and the dollar bounced back from earlier losses Friday as investors said weaker than expected U.S. December jobs figures did little to alter predictions for ongoing economic growth this year.

AP Business Writer

LONDON —

Stock markets and the dollar bounced back from earlier losses Friday as investors said weaker than expected U.S. December jobs figures did little to alter predictions for ongoing economic growth this year.

In Europe, the FTSE 100 index of leading British shares closed up 7.52 points, or 0.1 percent, at 5,534.24 while Germany's DAX rose 18.25 points, or 0.3 percent, to 6,037.61. The CAC-40 in France was 20.34 points, or 0.5 percent, higher at 4,045.14.

In the U.S., the Dow Jones industrial average recovered to trade modestly down 26.53 points, or 0.3 percent, at 10,580.33 around midday New York time, while the broader Standard & Poor's 500 index fell 1.51 point, or 0.1 percent, to 1,140.18.

The release of U.S. jobs data for December had hit stocks even harder earlier.

Figures from the Labor Department showed that 85,000 jobs were lost, way more than the 10,000 or so predicted in the markets. That initially outweighed revisions to past months' data showing that the U.S. economy actually posted positive jobs growth of 4,000 in November, instead of the initial estimate of 11,000 losses.

"Market expectations were for no change here, so when the data showed that 85,000 jobs were lost by the U.S. economy last month reaction was unsurprisingly negative," said David Jones, chief market strategist at IG Index.

"However, this has been tempered by the revision of November jobless numbers to show a gain of 4,000 jobs in that month - the first positive employment data for almost two years," he added.

And despite the initial modest disappointment, the figures clearly show that the U.S. economy is over the worst - around a year ago the U.S. economy was shedding a staggering half million jobs a month - and that if current trends continue then sustained jobs creation may well be on the cards in the next few months.

Michael Woolfolk, an analyst at Bank of New York Mellon, said there's little reason why stock prices should continue to underperform next week, especially as the "event risk" surrounding the jobs data has passed - the figures had been heavily hyped in the run-up to their release as a number of investors hoped they would provide clear evidence that the U.S. economy was already generating net job creation at the end of 2009.

"The fundamental outlook remains unchanged with the economy in the process of stabilization and unemployment expected to fall over the course of 2010," said Woolfolk.

The key driver to stock market performance, at least in the first part of the year, will likely be whether the economic figures, particularly out of the U.S., back up the optimism that is evident in company valuations following a near ten month bull run.

Stock markets around the world have rallied strongly since March's lows - the Dow and the S&P 500 for example surged more than 60 percent since then - as investors grew more optimistic about the global economic recovery after central banks and governments pushed through extraordinary policy measures to mitigate the deepest recession since World War II.

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The dollar was sold off sharply in the wake of the jobs data, trading down 1 percent on the day at one stage.

However, it too pared a chunk of its losses and by late-afternoon London time was trading 0.5 percent lower at 92.85 yen while the euro edged 0.2 percent higher to $1.4346.

The dollar has rallied over the last month or so partly because of mounting optimism about the pace of the U.S. economic recovery in the wake of November's jobs data.

Earlier in Asia, Japanese shares led the way, with the Nikkei 225 stock average rising 116.66 points, or 1.1 percent, to 10,798.32.

South Korea's Kospi added 0.7 percent to 1,695.26 as the Bank of Korea left its key interest rate at a record low after the government muscled in on the central bank's policy meeting.

Australia's market rose 0.3 percent and Taiwan's index was up 0.5 percent.

Chinese stocks recovered their early losses, with the Shanghai index closing up 0.1 percent at 3,196.00 and Hong Kong's Hang Seng ticking up 0.1 percent to 22,296.75.

Investors there were rattled Thursday after China's central bank slightly raised the interest rate on its three-month bills, heightening concerns the government would restrain the liquidity that's buoyed asset prices over the last year.

Oil prices fell, with benchmark crude for February delivery down 36 cents to $82.30 a barrel. On Thursday, the contract fell 52 cents to settle at $82.66.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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