European, US stocks rise after July jobs report

LONDON — European and U.S. markets surged Friday after a better-than-expected American jobs report raised hopes that the recession in the world’s largest economy is finally ending.

Germany’s DAX closed up 1.7 percent to 5,458.96, France’s CAC-40 jumped 1.3 percent to 3,521.14 and Britain’s FTSE 100 added 0.9 percent to 4,731.56.

In midday trading in New York, the Dow Jones industrial average was up 1.6 percent at 9,402.12 and the Standard & Poor’s 500 index gained 1.7 percent to 1,013.65.

Markets on both sides of the Atlantic were buoyed by U.S. government data showing employers cut just 247,000 jobs last month, the fewest in a year. Economists had expected 320,000 job cuts. The job losses in July compared with a revised figure of 443,000 in June.

The unemployment rate dropped to 9.4 percent from 9.5 percent in June. Economists forecast the rate would rise to 9.6 percent.

The jobs data “is surely confirmation that the U.S. economy has turned a corner,” said Howard Wheeldon, senior strategist at BGC Partners. Nevertheless, “we should not ignore that no less than 6.7 million jobs have been lost in the U.S. since December 2007,” he said, adding that signs of new job creation will likely be thin on the ground until there is a pickup in consumption and demand and business revenues begin to improve.

Earlier, Asian markets ended mixed as some investors feared the jobs report might show July job losses were worse than expected.

In Europe, financial stocks, which have made strong gains this week, weighed on indexes after the Royal Bank of Scotland reported a bigger first-half loss and issued a subdued outlook. The bank, in which British taxpayers hold a 70 percent stake after a government bailout last year, said its losses widened in the first half to 1.04 billion pounds ($1.7 billion) and that it had to take heavy writedowns.

Chief executive Stephen Hester warned that overall results may not substantially improve until 2011.

Hester’s comments were a “reality check” for European markets, which had reacted well to recent earnings reports from banks that had “been at the top end of expectations but still losses,” said James Hughes, market analyst at CMC Markets.

“Banking stocks aren’t out of the woods,” he added.

RBS shares plummeted 13 percent, while Lloyds Banking Group, another British part-nationalized bank which reported a smaller-than-expected loss on Wednesday, fell 3 percent.

Meanwhile, positive news came in the form of figures from Germany that showed the country’s exports were up 7 percent on the month in June. This was their biggest rise in nearly three years and the latest signal that prospects are improving for Europe’s biggest economy.

In Asia, Japanese and South Korean stocks rose but China, Australia and other markets ended the week down, denting a rally driven by hopes the global economy might be emerging from its worst slump since the 1930s.

Japan’s benchmark Nikkei 225 gained 0.23 percent to close at 10,412 and South Korea’s Kospi index gained 0.7 percent to 1,576. Hong Kong’s Hang Seng index fell 1.4 percent to 2,880.30 while Australia’s benchmark declined 0.64 percent to 4,303.10.

China’s benchmark Shanghai Composite Index lost 2.9 percent to close at 3,260.69. The Shenzhen Composite Index for China’s smaller second exchange dropped 3.4 percent to 1,087.23.

Singapore’s benchmark was down 2 percent at 2,549.35.

Oil prices slipped below $72 in European trading. Benchmark crude for September delivery fell 35 cents to $71.59 per barrel in electronic trading on the New York Mercantile Exchange. On Thursday, the contract gained 17 cents to settle at $72.14.

AP Business Writer Joe McDonald in Beijing contributed to this report.