GLOBAL stocks headed for their strongest weekly gain since May after a weaker-than-expected US jobs report eased fears of an imminent Federal Reserve rate hike, while strong earnings and AI enthusiasm outweighed concerns about the Iran war.
US stocks opened higher yesterday and Treasury yields fell, reflecting ebbing expectations that the Fed will raise rates at next month’s meeting.
The Nasdaq rose 0.7 per cent in early trading and the dollar fell, giving the Japanese yen a reprieve. The yen strengthened to 157.20 per dollar after earlier nearing 159, a level widely seen as a potential trigger for policy intervention.
MSCI’s All-World index has risen 2.4pc this week, the most in three months, and was steady yesterday. Europe’s STOXX 600 was up 0.6pc on the day and 2pc for the week, led by gains in healthcare and technology shares.
The US payroll report showed employment fell by 23,000 jobs, confounding expectations in a Reuters poll for an increase of 80,000. Analysts said the data gave the Fed more room to keep rates unchanged next month while assessing upcoming economic indicators, including next week’s US inflation report.
“History doesn’t repeat, but sometimes it rhymes,” said Lindsay Rosner, head of multi-sector fixed-income investing at Goldman Sachs Asset Management in New York. “For the third time in as many years, July jobs data saw a mid-summer loss of momentum. While incoming inflation data will be the ultimate arbiter, slowing jobs growth helps support a September hold.”
Money markets had been evenly divided on the prospects of a Fed rate increase next month before the payrolls report. After the data, the implied probability of a hike fell to about 40pc from roughly 55pc earlier.
“With yields and inflation still the key risks for stocks, we expect Friday’s NFP to trade as a ‘good news is bad news’ print,” said Michael Feroli, chief US economist at JPMorgan.
Conflict in the Middle East flared up again after Yemen’s Iran-aligned Houthis attacked Saudi Arabia, a major oil exporter. Riyadh warned that coordinated attacks by the Houthis and Iran-backed Iraqi militias were imminent.
Brent crude futures reversed course on Friday to fall 0.7pc to around $82 a barrel, as investors largely shrugged off Saudi Arabia’s warnings.
Iran, meanwhile, is reviewing a preliminary bill that would bar US, Israeli and other ‘hostile’ vessels from transiting the Strait of Hormuz, Iran’s semi-official Fars news agency reported on Thursday, citing a parliamentarian. The draft bill would impose fines of up to 20pc of a ship’s cargo value for violations.
Treasury yields fell after the soft jobs report. The 2-year note yield fell 7 basis points to 4.176pc, while the 10-year yield dropped 5 basis points to 4.61pc.
Gold moved inversely to the dollar, rising to its highest in around six weeks this week while the US currency hovered near six-week lows. Bullion has gained nearly 7pc this week, its strongest weekly performance since mid-January, when it hit a record $5,594. It was last up 2pc at $4,322 an ounce.
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