US jobs hopes give stocks a lift

[March 04, 2011]  LONDON (AP) -- Growing optimism over upcoming U.S. jobs figures helped stocks rally for the second day on Friday despite further increases in oil prices due to tensions in Libya.

Though investors are keeping a close watch on developments in Libya as the regime of Moammar Gadhafi attempts to fight back against rebels, who now control around half the country, the main point of interest will be the U.S. government's nonfarm payrolls data for February -- often a key driver for markets for a week or two after their release.

Following an upbeat survey from the ADP payrolls firm and an unexpected decline in weekly jobless claims, expectations for the U.S. government report have ratcheted higher. The consensus before the ADP survey was that U.S. employers added around 175,000 jobs. Some analysts now think the figure could be around the 250,000 mark.

Investors, though, are aware that the payrolls reports are volatile and hard to predict -- the past two months they had hiked their forecasts ahead of the release, only for the figure to come in much weaker than expected.

Marc Ostwald, a strategist at Monument Securities, said the optimism is "somewhat better placed on this occasion," with the more reliable anecdotal evidence from this week's two surveys from the Institute for Supply Management.

Though the payrolls figures are often subject to big revisions on a monthly basis, they are routinely at the heart of financial markets' attentions, especially at a time when investors are trying to work out when the Federal Reserve may start raising interest rates once again.

The prevailing view is that the Fed will continue to pump more money into the U.S. economy and keep its main interest rate near zero percent until there is clear evidence that the unemployment rate is heading down towards 7 percent. At the moment, it's around the 9 percent mark.

Ahead of the figures, European markets continued the solid tone that emerged Thursday following a difficult start to the week.

The FTSE 100 index of leading British shares was up 0.6 percent at 6,040 while Germany's DAX rose 0.8 percent to 7,283. The CAC-40 in France was 0.6 percent higher at 4,083.

Wall Street was poised for a perky opening, though that will depend on the jobs figures, which come out an hour before the bell. Dow futures were up 21 points at 12,260 while the broader Standard & Poor's 500 futures rose 1.6 point at 1,331.30.

In the currency markets, traders were still dealing with the repercussions from Thursday's heavy hint from European Central Bank chief Jean-Claude Trichet that the bank may increase interest rates next month -- way earlier than anticipated.

Speaking after the bank left its main interest rate unchanged at the record low of 1 percent, Trichet said "strong vigilance" was warranted and that an interest rate increase next month was "possible" though "not certain."

Those comments prompted a sizable rally in the euro as the markets had not been positioned for a rate hike so soon -- in fact, the expectation was that rates would remain on hold until the tail-end of the year.

After sharp gains on Thursday, the euro lost momentum and was trading flat at $1.3961.

Derek Halpenny, European head of global currency research at the Bank of Toky0-Mitsubish UFJ, said an April rate hike is now a "done deal" and is fully priced in by the markets.

However, he said it's notable that the one cent advance Thursday was well within a normal trading day's range and does "suggest that a significant amount of what is now expected by the ECB in the rates market is fully priced in the foreign exchange market."

As such, he said the euro's advance towards $1.40 and above could be a "slow grind."

Earlier in Asia, the Nikkei 225 stock average, Japan's main benchmark, climbed 1 percent to close at 10,693.66, while South Korea's Kospi jumped 1.7 percent to 2,004.68.

Hong Kong's Hang Seng added 1.2 percent to 23,408.86. In China, Shanghai's Composite Index ended the week at its highest level so far this year, gaining 1.4 percent to 2,942.31. The Shenzhen Composite Index of China's smaller, second exchange rose 1.1 percent to 1,286.22.

Hovering in the background is the crisis in Libya as Gadhafi tries to claw back some ground and protests against his regime in the capital city of Tripoli.

As a result, oil prices continued to rise, with the New York rate up 86 cents at $102.77 a barrel while the equivalent Brent rate in London rose $1.12 to $115.91 a barrel.

[Associated Press; By PAN PYLAS]

Pamela Sampson in Bangkok contributed to this report.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.