Europe Up As US Takes Breather For Labor Day Holiday

The FTSE and Dax have come out of the starting blocks strongly this week, up 1.2% and 1.4% respectively. This follows last week’s heavy selling in the US, with futures signalling more losses for the Nasdaq down 1.5%. The US market is closed for Labor Day today.

Shares in China and across the Asia-Pacific region were weaker, with China’s CSI 300 index down 0.3% per cent and Japan’s Nikkei off 0.5%. Hong Kong’s Hang Seng was also down 0.3%, although Australia’s S&P/ASX 200 managed to reverse losses to close up 0.3%.

It comes after a mixed Friday in the US. On the upside, the Labor Department’s jobs report showed the US unemployment rate fell to 8.4% in August from 10.2% a month earlier. Nonfarm payrolls, a measure of workers excluding farm workers and some other classifications, increased by 1.37 million in August. Economists had anticipated the unemployment rate to come in at 9.8% with 1.32 million nonfarm payrolls added, so the figures point to a faster than expected rate of recovery in the US. The payroll numbers received a significant boost from government hiring, as 328,000 census workers were added during the month, while local government employment jumped by 95,000. Although the unemployment rate remains elevated, The WSJ noted that it is now in line with previous major recessions. The better-than-expected figures were not enough to stop US markets from falling again on Friday, with 10 out of 11 S&P 500 sectors in the red.

Volatility index hits highest level in more than two months

All three major US indices posted substantial losses last week, most of which came during Thursday’s sharp sell-off. The Nasdaq Composite closed out the week 3.3% lower, while the S&P 500 was down 2.3% and the Dow Jones Industrial Average fell 1.8%. On Friday, the CBOE Volatility Index – a measure of investors’ short-term volatility expectations – hit its highest level in more than two months. In a Friday note, investment firm T. Rowe Price said that its traders had concluded much of the selling last week was likely due to investors deciding to take profits, rather than any change in fundamentals. They added that increased volatility has been driven by investors using options to try and take advantage of potential market gains. On Friday, the Nasdaq sank 1.3%, with PayPal (PYPL), Adobe (ADBE) and Alphabet (GOOGL) among the fallers. Tesla (TSLA) enjoyed a small rebound, to the tune of 2.8%, after being punished for much of the week but then fell more than 7% in after-hours trading.

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