US stock markets rise as new jobs data eases recession fears, but London remains nervous

US stocks rose yesterday after jobs data eased fears about a slowdown in the world’s largest economy.

There were fewer weekly jobless claims than expected, calming markets after Friday’s employment figures triggered a sell-off in global markets.

But analysts warned of further turbulence ahead as stock indices fell in London and Tokyo.

Matt Britzman, senior equity analyst at brokerage Hargreaves Lansdown, said: “Markets may have calmed down, but this rollercoaster week is not over yet.”

Official data showed yesterday that there were 233,000 initial jobless claims in the United States in the week to August 3, down from 250,000 the previous week and fewer than economists had expected.

The S&P 500 added 1.8 percent, the Dow Jones Industrial Average rose 1.3 percent and the technology-heavy Nasdaq Composite gained 2.6 percent.

But last week, figures revealed that US employers added just 114,000 jobs in July compared with forecasts of 185,000, and unemployment was the highest since October 2021.

This triggered a major global sell-off on Monday amid fears that the US Federal Reserve may have left it too late to cut rates and achieve a “soft landing” for the economy.

This continued to weigh on trading in London, where the FTSE 100 index closed down 0.3 percent after falling as much as 1.2 percent earlier in the day.

“The FTSE 100 gave back much of the gains it posted on Wednesday as global markets remain jittery following the recent sell-off,” said Russ Mould of broker AJ Bell.

Along with concerns about the health of the U.S. economy, an unexpected rise in interest rates in Japan accelerated the market turmoil. Investors borrowed in yen while Japanese interest rates were low, essentially giving them free money to invest in stocks and riskier investments.

But the Bank of Japan raised rates last week for the second time in 17 years, lifting its benchmark to 0.25 percent and raising borrowing costs.

That left traders scrambling to unload their investments and pay off their debts, contributing to the massive stock market sell-off seen earlier this week.

Tokyo’s benchmark Nikkei 225 index fell 0.7%, meaning it has lost 7% over the past week. This comes after the Japanese stock market suffered its biggest one-day drop since 1987 on Monday.

Rob Burgeman, senior investment manager at wealth manager RBC Brewin Dolphin, said: “Is this a harbinger of doom? Probably not. It’s never a pleasant experience to see sharp falls in share prices, but in this case we think it has more to do with distressed and forced sellers than a broader economic problem.”