European stock markets soared yesterday after weaker-than-expected US jobs figures eased pressure on the Federal Reserve to hike interest rates.

The FTSE 100 rose 1.7 per cent to 10,652.87 in London, while the Dax gained 2.2 per cent in Frankfurt and the Cac was up 1.7 per cent in Paris. 

On Wall Street, the Dow Jones Industrial Average hit a new record high, but the Nasdaq fell as tech giants sold off.

It came after the non-farm payrolls report showed employment rose 57,000 in June after a 129,000 rise in May and 148,000 in April. Analysts expected a 110,000 rise.

Chris Beauchamp, chief market analyst at IG, said: ‘Any sign that the Fed may not have to rush to increase borrowing costs naturally spells good news for equities around the globe.’

The figures suggested the US economy is not as strong as previously thought – giving Fed chairman Kevin Warsh a headache as the central bank battle to control inflation. It was thought the Fed would raise rates but it may now be put off.

On jobs, James Knightley, an economist at ING, said: ‘A disappointing outcome that has taken the wind out of the sails for calls for imminent rate hikes.’

There is now just a one-in-five chance of a rise this month, according to bets on financial markets.