US stocks followed their European counterparts higher yesterday, and the dollar dipped after a softer-than-expected June employment report eased the likelihood of a rate hike from the US Federal Reserve by the end of the year.
All three major US indexes advanced and gold surged following the hotly anticipated report.
The US economy added 57,000 jobs last month, or 48.2 per cent shy of consensus. The number marked a 55.8pc slowdown from May, which was revised sharply downward, to 129,000 from 172,000. However, the unemployment rate unexpectedly dipped to 4.2pc, edging closer to the full employment side of the central bank’s mandate. “This was a little bit cooler than the market expected ... but with the unemployment rate dropping to 4.2pc and yearly hourly wages at 3.5pc, this could be considered a Goldilocks report,” said Peter Cardillo, chief market economist at Spartan Capital Securities, in New York.
“(A rate hike) is still on the table,” Cardillo added. “The market seems to be betting for at least one rate hike, probably in the last quarter of the year.”
On Wednesday, Federal Reserve chair Kevin Warsh reiterated the central bank’s average annual 2pc inflation goal, but said that risks associated with war-related price pressures have come down. On the geopolitical front, a round of indirect US-Iran talks, focused on the crucial Strait of Hormuz, concluded with no sign that the negotiators made any headway towards lasting peace. Meanwhile, Russia launched hundreds of drones and dozens of missiles at Ukraine’s capital Kyiv, ripping into several residential buildings and killing at least 18 people.
The Dow Jones Industrial Average rose 477.33 points, or 0.92pc, to 52,786.09, the S&P 500 rose 49.89 points, or 0.65pc, to 7,531.95 and the Nasdaq Composite rose 141.19 points, or 0.53pc, to 26,177.28. European shares advanced as strength in defensive stocks offset tech weakness, and gained momentum after the US jobs data release. MSCI’s gauge of stocks across the globe rose 6.42 points, or 0.57pc, to 1,124.28. The pan-European STOXX 600 index rose 1.6pc, while Europe’s broad FTSEurofirst 300 index rose 41.08 points, or 1.60pc. Emerging market stocks fell 31.97 points, or 1.86pc, to 1,689.96.
The dollar slid after the soft employment report, while the Japanese yen surged as traders girded themselves for a potential intervention by Japanese authorities.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.73pc to 100.66, with the euro up 0.69pc at $1.1455. Against the Japanese yen, the dollar weakened 1.03pc to 160.88.
The 30-year bond yield rose 1.14 basis points to 4.9774pc from 4.966pc late on Wednesday. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 2.69 basis points to 4.137pc, from 4.164pc late on Wednesday. Oil prices dipped to a four-month low as supply concerns eased following the conclusion of the US-Iran talks in Doha.
US crude fell 1.28pc to $67.70 a barrel and Brent fell to $70.81 per barrel, down 1.08pc on the day. Gold jumped after the weak payrolls report reduced the probability of Fed tightening this year. Spot gold rose 2.45pc to $4,128.69 an ounce. US gold futures rose 1.74pc to $4,139.20 an ounce.
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