US stocks, interest rates climb as job market keeps improving

European shares jump, Asian markets mostly down

NEW YORK, June 2, (Agencies): Stocks climbed Friday after a report showed the US job market is still revving higher, even with the specter of a possible trade war hanging over markets around the world.

The better-than-expected news on jobs helped the S&P 500 more than recover all its losses from earlier in the week. Interest rates and the value of the dollar also rose on expectations that the Federal Reserve got more justification to continue raising interest rates steadily, with its next decision due in about a week and a half.

Beyond the jobs report, strongerthan-expected readings came in on US manufacturing growth and construction spending. They helped turn attention away from the worries about global trade tensions and European politics that had dragged on stocks in recent weeks.

“It’s refreshing that some strong economic data today took some focus off the trade rhetoric,” said Jon Adams, senior investment strategist at BMO Global Asset Management. “It’s been a banner day for US data overall. You look at the payrolls report, and it’s hard to find too much negative in there.”

The strong reports raise the likelihood that the Federal Reserve may increase short-term interest rates four times this year, rather than just three. Higher rates can hurt stock prices, but Adams said investors appear relatively prepared for the possibility “because the Fed is hiking for the right reasons.”

The S&P 500 index rose 29.35 points, or 1.1 percent, to 2,734.62. For the week, it climbed 0.5 percent after scrambling back from a loss of more than 1 percent earlier.

The Dow Jones industrial average jumped 219.37, or 0.9 percent, to 24,635.21, and the Nasdaq composite rose 112.21, or 1.5 percent, to 7,554.33. The Russell 2000 of small-company stocks rose 14.37, or 0.9 percent, to 1,647.98.

Twice as many stocks rose as fell on the New York Stock Exchange.

Employers added 223,000 jobs last month, more than economists expected and a pickup from April’s hiring rate of 159,000. Wages for workers also accelerated, with pay up 2.7 percent from a year ago. That’s a bit faster than April’s 2.6 percent wage growth.

Europe

Meanwhile, European shares breathed a sigh of relief on Friday with Italian stocks supported after a deal to form a coalition government ended three months of political deadlock and removed the risk of another general election.

The pan-European STOXX 600

index rose 1 percent, while German stocks gained 0.9 percent and Britain’s FTSE 100 rose 0.3 percent.

Italian stocks rallied as much as 2.9 percent, the standout performers in Europe as Italian banks gained 3.8 percent. Recent political uncertainty has roiled Italian stocks, resulting in a slide of more than 9 percent for the Italian benchmark in May, its worst month since June 2016.

Giuseppe Conte was sworn in on Friday as Italy’s prime minister, heading western Europe’s first anti-establishment government. Investors had feared that a repeat vote could become a proxy referendum on Italy’s euro membership.

Shares in Italian banks Banco BPM, BPER, UBI and Intesa Sanpaolo were among the biggest risers on the STOXX, up between 3.3 percent to 8.5 percent after sustaining heavy losses in the previous month.

However, some market watchers remained cautious given that Italy’s antiestablishment parties, the League and the 5-Star Movement, are planning to spend big.

“Pending better visibility on the new

government’s actions, Italian assets may continue to price in some policy uncertainty,” Matteo Ramenghi, chief investment officer USWM Italy, said in a note.

Italian shares ended off highs, weighed down by a Reuters report that EU lawmakers from the two parties forming its new government coalition backed this week a rejected proposal to set up funds to help countries quit the euro.

A trader at a European bank said the decline was also triggered by tecnhnical factors and a 4.5 percent slump in Fiat Chrysler shares.

Asia

Asian markets fell on Friday as fears of a trade war blasted back to the fore after Donald Trump imposed stiff tariffs on European, Mexican and Canadian steel and aluminium.

The move sparked immediate countermeasures by Mexico and Canada, while the European Union threatened a similar response, throwing up the prospect of a painful conflict between some of the world’s biggest economies.

French President Emmanuel Macron

labelled the move “illegal”.

It also overshadowed news that Italy’s populist parties had reached a deal to revive a coalition government and avoid a snap election that many had feared could be used as a referendum on the country’s euro membership.

However, while some say the measures – which followed US warnings that tariffs on some Chinese goods were still up in the air – are a White House ploy to gain the upper hand in ongoing talks, others warn the issue could escalate further.

“While markets overreacted to the Italian mess a couple of days back, it strikes me they might be under-reacting to the real – distractive – negatives of this trade skirmish developing into a trade war,” said Greg McKenna, chief market strategist at AxiTrader.

“My guess is that many traders and investors see this as another negotiating tactic from the Trump Administration,” he said.

“But we are now genuinely faced with the type of tit-for-tat trade spat, of which there will be few winners and which could materially impact global growth and relations.”