European stocks are expected to open slightly lower on Friday as investors across the world digest details of President Obama’s $447 billion jobs package.
Wall Street had closed lower ahead of the President’s speech to Congress and stocks in Asia were mixed.
The eagerly-awaited jobs package was worth more than the market had been expecting, with the majority of the plan focused on tax cuts.
“While all indications going into Obama's jobs speech were that the size of the package would be around $300 billion, it seems that it was just the spin doctors lowering expectations,” said Socgen economist Rudy Narvas following the speech.
“Our estimated breakdown of the proposal and given positive remarks from the Republican leadership suggests that fiscal stimulus for 2012 may be bigger than we had anticipated, putting upward risk to 2012 growth,” he added.
Pimco’s CEO Mohamed El-Erian believes the speech could be a 'sputnik moment.'
“The Administration has at long last recognized the severity of America's unemployment crisis and the need for a comprehensive policy response,” wrote El-Erian.
The stock reaction in Asia indicates the market is not that impressed with the plan but Tim Geithner, the US Treasury Secretary, will be calling for other members of the G7 to consider following America’s lead at a meeting in Marseille later on Friday.
“The biggest constraints on action in the major developed economies now have less to do with those economic realities and more to do with political paralysis, misplaced fears about inflation and moral hazard, and unwarranted disaffection with the efficacy of the traditional fiscal tools of tax cuts and investment to encourage growth,” Geithner wrote in the Financial Times.
Federal Reserve chairman Ben Bernanke had said earlier in the day that he would spare no effort to boost growth in a sign that the central bank and the White House are serious about the risk of recession.
“The Federal Reserve will do all it can to help restore high rates of growth and employment in a context of price stability," said Bernanke.
Back in Europe and Dow Jones reports the EU is pushing Greece to cut its deficit by a further 0.7 percent of GDP. However, a source at the IMF told Dow Jones that the fund fears existing targets may be stretching the limits of what is politically possible.
In China, inflation data has cooled with CPI for August falling to 6.2 percent from 3-year highs in July.
Bank of America is reported to be considering cutting 40,000 jobs according to the Wall Street Journal while Texas Instruments missed already lowered forecasts after the close in the US which could impact European semi-conductor stocks at the open.