Strong US jobs report sparks global stocks in rally
US stocks recover from post-Brexit losses
Wall Street stocks rose on Friday, recovering all the losses sustained after Britain’s surprise vote last month to leave the European Union, and equities around the globe also jumped after data showed US job growth in June accelerated more rapidly than even the most optimistic forecasts.
Friday’s gains, which saw the S&P 500 index finish a hair below its record closing high, were enough for US equities and MSCI’s gauge of markets around the world to end the week in the green.
The US economy added 287,000 jobs last month, according to the Labor Department, smashing the consensus forecast of 175,000. It was the highest total in eight months and wiped out expectations that the Federal Reserve might cut US interest rates in the coming months.
The Dow Jones industrial average rose 250.86 points, or 1.4 per cent, to 18,146.74, the S&P 500 gained 32 points, or 1.53 per cent, to 2,129.9 and the Nasdaq Composite added 79.95 points, or 1.64 per cent, to 4,956.76.
“What this report does is it assuages fears about the economy losing momentum,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. “That’s been weighing on the minds of investors.”
European stocks also surged after the data’s release, with Germany’s DAX stock index rising 2.24 per cent to lead the region’s bourses. Europe’s FTSEuroFirst 300 index of top shares rose 1.49 per cent.
MSCI’s all-country world stock index rose 1.03 per cent.
Oil prices initially rose more than 1 per cent after the strong jobs data, but oversupply concerns resurfaced with data showing the US oil rig count rose by 10 this week.
Brent crude futures rose 0.5 per cent to US$46.64 per barrel. US crude futures gained 0.2 per cent to $45.24.
Still, the upbeat US jobs report failed to significantly alter the longer-term expectation that the Federal Reserve will keep US interest rates on hold for at least a year, according to Fed funds futures prices.
That flattened the yield curve, with investors buying US government debt with longer-dated maturities and selling shorter-dated notes.
The 10-year Treasury note rose 8/32 in price to yield 1.361 per cent. Two-year notes fell 1/32 in price to yield 0.617 per cent.
Yields on 10- and 30-year Treasuries fell to their lowest on record on Tuesday and for the week yields declined 22 and 15 basis points respectively.
Analysts also pointed to international investors’ preference for US government bonds, which hold notably higher yields than government bonds in comparable developed markets like Britain, Japan and Germany.
“There is such a tremendous appetite for (U.S. Treasuries) that any sell-offs are bought very quickly and I think that’s what you saw today,” said Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management in Kansas City, Missouri.
Increased buying in Treasuries pushes up prices, which move inversely to their yields.
Low expectations for a Fed rate hike also pushed the US dollar down against the yen. While the dollar rose immediately after the jobs report, climbing to a two-week high, those gains evaporated and the dollar was last down 0.3 per cent to 100.45 yen.
Gold rose 0.35 per cent as traditionally safe-haven assets all saw gains despite the rally in stocks.