LONDON: Stock markets mostly fell on Friday on profit-taking despite data showing a surge in US jobs creation.

Equities largely bounced back this week after heavy falls triggered by worries about the economic fallout from China’s deadly coronavirus.

But profit-taking settled in on Friday.

“Having already rallied hard this week, it was going to be hard to push equities higher into the weekend, especially given the uncertainty surrounding the coronavirus in China,” said Chris Beauchamp, chief market analyst at online trading firm IG.

Stocks retreated “despite a stronger-than-expected January labour report, as investors take a breather to reassess after a string of four-straight days of solid gains,” analysts at Charles Schwab brokerage said in a statement.

US employers added 225,000 new non-farm jobs last month, far surpassing expectations, thanks to big gains in construction, and leisure and hospitality.

While the unemployment rate ticked higher, this was due to more people entering the labour force. Wages rose.

Analyst Patrick O’Hare said that with the US market rising nearly 4 percent this week it was likely due a period of consolidation in any case.

“The key takeaway from the report is that employment conditions remain in that sweet spot of being encouraging on the hiring front and encouraging on the inflation front in that average hourly earnings growth isn’t accelerating sharply enough to provoke imminent rate-hike concerns,” he said.

Strong US data, Chinese financial support and a broadly healthy earnings season had provided a much-needed boost to equities this week after last week’s sharp sell-off. Meanwhile there is a sense that the global economic impact of the virus outbreak could be limited.

China’s decision Thursday to halve tariffs on $75 billion of US goods as part of their trade detente also cheered investors.

Observers say the virus, which has killed more than 600 people and infected 31,000, will batter Chinese growth in the first quarter but that it could rebound later in the year, as it did after SARS.

“If the pattern of the SARS impacts are a guide, there is the potential for the Chinese economy to rebound with an above-potential growth rate once the outbreak subsides,” said T. Rowe Price analyst Chris Kushlis.

“In 2003, China’s growth rate climbed to 15.5 percent in the third quarter as pent-up demand saw consumption rebound as the SARS outbreak waned.

“A similar rebound following the coronavirus could help keep the longer-term track of the Chinese economy on a relatively even keel,” Kushlis added.

Oil prices spent most of the day lower, but later stabilised, with Russia saying it would decide within days whether to back output reductions with its OPEC partners to counter a weakening of crude prices amid the spreading coronavirus.

Energy Minister Alex­a­n­der Novak’s announcement came a day after Russia rejected proposals to slash crude output at an Opec+ meeting, media reported, and asked instead for more time to assess the virus’ impact on the world economy and demand for crude.

They already have a production cut agreement in place, but Opec kingpin Saudi Arabia and others have called for additional rapid cuts to support the crude oil price which is almost 20 percent lower than a month ago.

Published in Dawn, February 8th, 2020