Wall Street eked out gains on Friday that all but erased the losses investors suffered in a week of volatile trading that included some of the worst and best days for US stocks in almost two years.
In New York the benchmark S&P 500 and the tech-heavy Nasdaq each closed 0.5 per cent higher on Friday, leaving both little changed on the week.
Friday’s gains lifted the S&P 500 more than 4 per cent above the lows it touched on Monday when a global sell-off sparked by weak US jobs figures a week ago turned into a full-scale rout.
Although most big equity markets have recovered the bulk of Monday’s losses, indices remain below the levels from before the US jobs report last week that first fuelled concerns about the health of the world’s biggest economy and triggered the selling spree.
The S&P 500 needs to gain another 2 per cent to recover its levels from before the sell-off began, while the Nasdaq Composite remains about 2.7 per cent short.
“We are not completely out of the woods,” said Beata Manthey, head of European equity research at Citigroup.
The recovery of the past two days was spurred by better signals on the health of the US labour market on Thursday as unemployment claims fell faster than expected.
Investors were on Friday also beginning to turn their focus to two July reports due next week, saying rising worries about the strength of the US consumer meant Thursday’s retail data could provide more of a steer for markets in the near term than Wednesday’s inflation report.
“The primary financial markets concern remains the risk of a significant tightening of financial conditions leading to a private sector retrenchment,” said Gregory Daco, chief economist at EY.
European stocks rose, with the Stoxx Europe 600 index gaining 0.6 per cent to close marginally above the level it ended last week. France’s Cac 40 increased 0.3 per cent, while Germany’s Dax rose 0.2 per cent and the UK’s FTSE 100 gained 0.3 per cent.
Earlier, Asian stocks rebounded, with Japan’s Topix closing 1 per cent higher, while South Korea’s Kospi and Hong Kong’s Hang Seng rose 1.2 per cent.
Friday’s relative calm followed data showing new US applications for unemployment aid — seen as a proxy for job cuts — had fallen to their lowest level in a month.
Figures on Thursday gave a reading of 233,000 for initial state unemployment claims in the week ending August 3 on a seasonally adjusted basis, down from the previous week’s upwardly revised level of 250,000 — and below economists’ forecasts of 240,000.
“It was the jobs report last week that sent markets into a tailspin,” said Kristina Hooper, chief global market strategist at Invesco, so “it makes sense it was a labour market point that would calm markets” this week.
Japan had borne the brunt of Monday’s sell-off, with the Topix dropping 12 per cent in a single trading session. It rebounded the following day with the biggest one-day gain since 2008, as investors decided the decline had been wildly overdone. On Friday, the Topix was 3 per cent lower on the market close a week earlier.
“Volatility is still high, so we may continue to see market fluctuations [in Japan], said Naoya Fuji, equity strategist at Nomura, who emphasised that strong corporate earnings, share buybacks and better corporate governance had helped the Japanese market recover from Monday’s shock sell-off.