Equities positive bonds down on unexpected US jobs gains

An unexpected jump in U.S. employment sent world equities and oil surging on hopes that the global economy has started to recover from the coronavirus pandemic, pulling investors out of perceived safe havens like government bonds and gold.

U.S. nonfarm payrolls rose by 2.509 million jobs last month after a record plunge of 20.687 million in April. Economists had forecast the unemployment rate jumping to 19.8% in May and payrolls falling by 8 million jobs.

MSCI’s gauge of stocks across the globe gained 2.04%. The index is now down 4.5% for the year to date and trading at its highest level since early March, before the U.S. economy went into lockdown in an effort to slow the spread of the novel coronavirus.

On Wall Street, the Dow Jones Industrial Average rose 3.15%, the S&P 500 gained 2.62%, and the Nasdaq Composite added 2.06%. The broad S&P 500 is now down about 1% for the year to date. Equity gains were widespread before the surprise jobs report. MSCI’s broadest index of Asia-Pacific shares outside of Japan rose 0.9%, reversing early losses to stay near a 12-week high. The index is up about 7.6% this week, on track for its best weekly showing since December 2011.

Emerging market stocks were up 0.7% and also on course for their best week since December 2011. Hopes for a swift economic recovery sank U.S. government bonds, which had reached historic highs on fears that the pandemic would erode consumer demand.

Europe has now clawed back two-thirds of the losses incurred amid the coronavirus pandemic and Bank of America analysts said on Friday they expect European stocks to rise another 10% by the end of September on expectations of a pickup in business activity.

Hopes for an economic recovery sent oil prices surging. U.S. crude recently rose 4.97% to $39.27 per barrel and Brent was at $42.14, up 5.38% on the day.

This article was compiled by BOV Asset Management Limited, a member of the BOV Group. BOV Asset Management,TG Complex, Suite 2, Level 3, Brewery Str., Mriehel BKR 3000. Email: infoassetmanagement@bov.com Internet address: www.bovassetmanagement.com. BOV Asset Management is licensed by the MFSA.