Increase in US employment calms a week of volatile trading

Global markets rallied on Friday as a robust increase in US employment helped calm a week of volatile trading triggered by renewed fear of a transatlantic trade war and political instability in Europe.

The US economy reached its lowest unemployment rate in 18 years after American employers added 223,000 jobs in May in a continuation of one of the longest periods of growth in the country’s recent history, sending global equity markets higher and bolstering the value of the dollar.

In Europe, Italian government debt staged a sharp recovery as a coalition government of the anti-establishment Five Star Movement and the far-right League was finally sworn into power under new prime minister Giuseppe Conte.

It ended the country’s longest postwar political crisis and averted a fresh election that investors feared would become a de facto referendum on the country’s membership of the euro.

Spanish stocks rose 1.8 per cent after falls earlier in the week as socialist leader Pedro Sánchez formed a new government after centre-right prime minister Mariano Rajoy was ousted in a parliamentary vote of no-confidence following a corruption scandal.

Investors said that the healthy global economy meant that markets were able to ride out this week’s ructions more ably than they had during past bouts of nerves over Europe.

The FTSE All-World index rallied 0.8 per cent, its biggest one-day gain since early April, narrowing the loss of global stock markets this week to 0.2 per cent, and safer government bonds gave up some of their gains as nervousness abated.

Asian markets closed mixed early on Friday, with investors cautious over trade tensions after the U.S. announced tariffs on steel and aluminum imports from several of its allies would be reapplied.

The Nikkei 225 edged down by 0.14 percent and the broader Topix rose 0.1 percent. Automakers were among the best-performing sectors, with gains also seen in materials and banks.

Meanwhile, Brent crude futures added 0.09 percent to trade at $77.63 per barrel. U.S. crude fell 2.23 percent in May, breaking a two-month win streak.