Global stocks, bonds rally as weak US jobs report cools rate-hike bets
Weak US jobs data eased rate-hike fears, boosting global stocks and bonds, while the yen strengthened and oil slipped.
Global equities were on track for their best week since May on Friday, after a softer-than-expected US jobs report dampened expectations of an imminent Federal Reserve rate increase. The rally was further supported by strong corporate earnings and sustained enthusiasm for artificial intelligence, which helped offset concerns about escalating tensions in the Middle East.
US stocks opened higher, with the Nasdaq climbing 0.7% in early trading, while Treasury yields declined. The moves reflected a shift in market sentiment, with traders now seeing a lower probability of a rate hike at the Fed's next meeting.
The US dollar weakened against major peers, providing relief for the Japanese yen. The currency strengthened to 157.20 per dollar after earlier approaching 159, a level that market participants widely view as a potential trigger for official intervention.
MSCI's All-World index rose 2.4% for the week, its strongest three-month performance, and held steady on Friday. Europe's STOXX 600 gained 0.6% on the day and 2% for the week, led by healthcare and technology shares.
The US payroll report showed employment fell by 23,000 jobs in July, defying expectations of an 80,000 increase. Analysts said the data gives the Fed more room to keep rates unchanged next month while it assesses upcoming economic indicators, including next week's 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. "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 split 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 40% from roughly 55% earlier.
In commodities, Brent crude futures reversed course to fall 0.7% to around $82 a barrel, as investors largely shrugged off Saudi Arabia's warnings of potential attacks by Yemen's Houthis and Iran-backed Iraqi militias. Meanwhile, Iran is reviewing a preliminary bill that would bar US, Israeli, and other "hostile" vessels from transiting the Strait of Hormuz, with fines of up to 20% of a ship's cargo value for violations.
Treasury yields fell after the jobs report, with the 2-year note yield down 7 basis points to 4.176% and the 10-year yield dropping 5 basis points to 4.61%. Gold moved inversely to the dollar, rising to its highest in around six weeks and gaining nearly 7% for the week, its strongest performance since mid-January. Bullion was last up 2% at $4,322 an ounce.