Jobs surprise puts Europe on back burner

THE sharemarket closed higher yesterday after an unexpected rise in employment left economists scratching their heads.

THE sharemarket closed higher yesterday after an unexpected rise in employment left economists scratching their heads.

The positive news helped investors shrug off concerns about Europe's financial system, although financial stocks weighed heavily on the benchmark index.

The S&P/ASX 200 Index gained 20.5 points, or

0.48 per cent, to 4295.6.

Economists had thought another rate cut was on the cards for next month after the Reserve Bank surprised everyone a week ago by cutting the cash rate by half

a percentage point.

However, things became slightly less certain yesterday after data showed 15,500 new jobs were created last month, compared with a predicted contraction of 5000.

That meant Australia's monthly jobless rate had dropped to 4.9 per cent, when economists expected it to rise to 5.3 per cent.

"The good jobs and other reports means [the Reserve Bank] can comfortably sit on their hands in June, having got ahead of the curve in May with a 50-basis-point cut," said NAB chief economist Rob Henderson.

The news helped investors ignore worrying signs from Europe, where Spain's stockmarket hit an

8?-year low overnight on concerns its banks were underfunded.

Among Australia's big banks, ANZ dropped 97? to $22.15 after the stock went ex-dividend. Analysts said the fall was typical of the view in the market that the big banks were likely to shed more than their dividends this season.

After National Australia Bank slipped 4?, at $24.57, despite its six-month

profit rising to a record

$2.83 billion, analysts suggested NAB's results showed its core banking business was under pressure.

Commonwealth Bank gained 24? to $51.90 and Westpac firmed 6? to $22.90.

In the resource sector, Rio Tinto was 71? richer at $61.94 as Rio's chairman told shareholders he was more confident about the global economic picture than he was six months ago. BHP Billiton rose 29? to $34.62.

News Corp put on 89? to $20.16 and its non-voting stock advanced 93? to $19.96 after a 47 per cent rise in third-quarter net profit. But the company said things would be tough for its Australian and UK newspapers in the final three months of this financial year due to soft advertising markets.

Leighton Holdings was 17? higher at $19.35 after it was awarded $800 million in gas and water infrastructure contracts in Queensland.

On Wall Street on Wednesday, the Dow Jones dropped 97.03 points, or

0.75 per cent, to 12,835.06 points.

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