Traders work on the floor of the New York Stock Exchange (NYSE) on Aug. 7.Jeenah Moon/Reuters
Global stocks headed for their strongest weekly gain since May after a weaker-than-expected U.S. jobs report eased fears of an imminent Federal Reserve rate hike, while strong earnings and AI enthusiasm outweighed concerns about the Iran war.
At 12:12 p.m. ET, the S&P/TSX composite index was up 154.74 points, or 0.43 per cent, at 36,291.05.
U.S. stocks rose on Friday, led by technology and consumer discretionary shares, and Treasury yields fell, reflecting ebbing expectations that the Fed will raise rates at next month’s meeting.
Among major gainers around midday were SpaceX, up 12 per cent on Friday and 19 per cent for the week despite a large share lockup having been lifted on Thursday, and Tesla, up 3.8 per cent for the day and 6.4 per cent for the week.
The Nasdaq rose 1.3 per cent near midday and the dollar fell, giving the Japanese yen a reprieve. The yen strengthened to 157.70 per dollar after earlier nearing 159, a level widely seen as a potential trigger for policy intervention.
MSCI’s All-World index has risen 2.4 per cent this week, the most in three months, and was steady on Friday. Europe’s STOXX 600 was up 0.6 per cent on the day and 2 per cent for the week, led by gains in healthcare and technology shares.
The U.S. 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 U.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 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 40 per cent from roughly 55 per cent earlier.
“This morning’s report cast some cold water on the idea that the jobs market is as rock solid as people have been talking about,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management, in Charlotte, North Carolina. “The weak jobs report means the Fed can no longer focus exclusively on inflation. It has to balance price stability against full employment, making it much more likely to stay on hold at its next meeting.”
“All things being equal, that’s good for the stock market. This is one of those ‘bad news is good news’ situations: bad news in the labor market could be good news for the stock market because the Fed is going to be on hold.”
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 0.7 per cent to around US$82 a barrel, as investors largely shrugged off Saudi Arabia’s warnings.
Iran, meanwhile, is reviewing a preliminary bill that would bar U.S., Israeli and other “hostile” vessels from transiting the Strait of Hormuz, Iran’s semi-official Fars news agency reported on Thursday, citing a lawmaker. The draft bill would impose fines of up to 20 per cent of a ship’s cargo value for violations.
Treasury yields fell after the soft jobs report, though they bounced off their early morning lows at midday Eastern time. The 2-year note yield fell 5 basis points to 4.20 per cent, while the 10-year yield dropped 2 basis points to 4.64 per cent.
Likewise, the U.S. currency slipped alongside rate expectations, pushing the dollar index down 0.3 per cent to 99.61 and lifting the yen.
Gold moved inversely to the dollar, rising to its highest in around six weeks this week while the U.S. currency hovered near six-week lows. Bullion has gained nearly 7 per cent this week, its strongest weekly performance since mid-January, when it hit a record US$5,594. It was last up 2.6 per cent at US$4,414 an ounce.
Reuters
