US heads for more volatility as jobs data crushes brief rise in sentiment

PUBLISHED : Monday, 09 April, 2001, 12:00am
UPDATED : Monday, 09 April, 2001, 12:00am

Hong Kong investors can expect another rocky ride this week as the misery on Wall Street shows scant sign of abating.

Last week, the Hang Seng finished down 2.93 per cent, at 12,386.61 points, a loss which would have been far greater but for Friday's 2.67 per cent lift.

'The markets will again be volatile and at the mercy of the United States markets,' Dao Heng Securities institutional sales head Raymond Tsui Yick-ki said.

Any optimism arising from Thursday's strong performances from the Dow Jones Industrial Average and the Nasdaq Composite Index were a fleeting memory by Friday as disastrous economic data sent the US markets back into their now-familiar tailspin.

With the jobs data in hand, the Dow slid 1.28 per cent while the Nasdaq lost 3.62 per cent.

Along with the usual earnings warnings, which have come to typify the week-old first-quarter reporting season, US investors were given more reasons to sell by the Labour Department, which, in stark contrast to expectations, reported 86,000 non-farming sector jobs disappeared last month, the largest loss since November 1991.

The jobs data was seen as yet another nail in the coffin of the nine-year US economic expansion and market bull run.

'It was lower than the market was expecting,' Celestial Securities research head Herbert Lau said.

'Given the huge lay-offs in US corporations during the past few months, the unemployment rate should pick up in coming months. That will also hurt market sentiment and consumer spending.'

Mr Lau said along with the jobs data would come increased speculation about the US Federal Reserve seeking more aggressive interest-rate cuts 'but even rate cuts probably won't lift these markets too much'.

However, he also said that fears of currency weakness in Hong Kong did not rule out the Hong Kong Monetary Authority matching the Fed on rate cuts.

'The weakness in the local currency could be temporary and, given the huge reserves we have - the third-largest in the world - I don't think we should worry too much about any downside on our currency,' Mr Lau said.

South China Online vice-chairman Howard Gorges said a resolution in the row between Washington and Beijing, which erupted from a mid-air plane collision, would remove some overhang.

'On the upside, good news between China and the US would be helpful, but that might drag on,' he said.

However, the market is likely to be on tenterhooks as some of the key players in the US and Chinese corporate worlds step forward to announce their results this week.

All eyes will be on today's numbers from China Mobile. The stock jumped 11.11 per cent to HK$33 on Friday, having been beaten down in recent weeks.

'I don't think people will be too interested in the stock because of global market weakness,' Mr Lau said.

'We saw quite a rebound on Friday so this put them in position for some profit taking and also, the hedge funds won't let this one go.

'I think they'll try to depress the stock further.'

In the US, more groans of dismay are expected as earnings results will come from Motorola tomorrow, and Internet play Yahoo! on Wednesday.

On Thursday, General Electric - by some measures the world's largest company - steps forward to present its first-quarter results.

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Key Figures

Week's close: 12,386.61 (- 374.03)

Turnover (daily average): $7.62 bln

Volume (daily average): 4.56 bln shares

Week's high: 12,843.9

Week's low: 12,062.84

April futures: 12,440 (- 420)

May futures: 12,423 (- 423)