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US job losses sour mood; euro data unlikely to soothe

US job losses sour mood; euro data unlikely to soothe
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First Published: Fri, Jul 03 2009. 11 55 AM IST
Singapore: Heavy job losses in the United States and Europe soured market sentiment, pointing to a long, slow recovery from the world’s deepest recession in eight decades.
Friday’s euro zone service sector surveys for June and retails sales for May are unlikely to cheer investors either, with both sets of data expected to show a deterioration from the previous month.
US employers cut more jobs than expected in June, pushing the jobless rate to a 26-year peak of 9.5%, while unemployment in Europe in May rose to a 10-year high, Thursday’s data showed, scuttling lingering hopes for a quick bounce.
Since the US economy fell into recession in December 2007, it has lost 6.5 million non-farm jobs and the unemployment rate has nearly doubled. Europe’s single currency area meanwhile has lost 3.4 million jobs since May 2008 and the jobless rate spiked to 9.5%.
World stock markets, which rallied in the second quarter on recovery hopes, slumped after the jobs data as investors found little evidence of a nascent sustainable upturn.
While manufacturing reports from around the world this week pointed to a bottoming of the global recession, economists said jobs and the buying power of consumers remained under threat.
An expected 0.1% drop in euro zone retail sales in May and a forecast pick-up in the pace of contraction in the single currency area’s dominant service sector are set to add to evidence that the world economy is not yet out of the woods.
The results of the June services survey are due shortly before 0800 GMT, while the retail sales data are expected at 0900 GMT.
RESILIENT ASIA
The Dow Jones industrial average closed 2.6% down, while the broad Standard & Poor’s 500 gauge lost 2.9%. Government debt prices and the US dollar rose, reflecting heightened risk aversion.
Japan’s Nikkei average shed 1.4% on Friday, dragged down by a 6.3% slide in Seven & I Holdings after Japan’s biggest retailer kicked off the earnings season with an unexpected drop in quarterly profit.
But other Asian stocks fared better, slipping less than 1%, with investors reluctant to give up their bets on recovery just yet.
“Belief that economic fundamentals are near their bottom is still firm here,” said Won Jong-hyuck, a market analyst at SK Securities in Seoul.
In fact, Asia’s investors had more reasons to cheer with evidence that several economies around the region were already on the mend, contrasting with the prevailing gloom in much of the developed world.
Asia’s emerging powerhouses China and India never stopped growing and now show signs of picking up after hitting a soft patch late last year and early in 2009.
India’s finance ministry said in a report on Thursday that Asia’s third-largest economy could see growth of around 7% this year and more in coming years if it makes sweeping reforms.
China, the world’s No.3 economy and its prime growth engine, aims for even faster growth of 8% this year with the help of its 4 trillion yuan ($585 billion) two-year spending programme and a surge in bank lending.
A newspaper report on Friday said Chinese banks were poised to lend a record 10 trillion yuan this year, double Beijing’s minimum target, with first half loan growth already estimated to top 7 trillion.
Australia, the only developed nation that so far has managed to skirt recession, also offered encouragement with vehicle sales surging in June and the service sector showing the first expansion in 15 months.
Japan, however, is still in trouble.
The world’s No.2 economy probably returned to growth in the second quarter after its longest-ever 12-month slump, but weak consumer spending and its dependence on export markets such as the United States and Europe, bode ill for the quarters ahead.
Economics Minister Yoshimasa Hayashi on Friday expressed concern about the US economy and said it needed close monitoring. “As I said yesterday, the US economy has not bottomed out yet,” he told reporters after a cabinet meeting.
Hayashi said on Thursday the US economy was the biggest external concern for export-focused Japan’s recovery.
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First Published: Fri, Jul 03 2009. 11 55 AM IST
More Topics: Recession | US | Asia | India | Jobs |