Stocks surge on latest US jobs data
‘Near-perfect’ numbers
WORLD stocks surged to a two-week high yesterday after strong US jobs data at the end of last week helped to take the edge off investors’ concerns about the possibility of a trade war breaking out between the US and other major economies.
European shares shot up across the board, following their Asian counterparts, while emerging-market currencies strengthened as investors bought up so-called riskier assets and sold “safe-haven” securities, such as gold and government bonds.
Markets have been cheering Friday’s US non-farm payrolls data, which showed a hefty 313 000 rise in jobs, but also disclosed that the annual growth in average hourly earnings had slowed to 2.6 percent after spiking in January.
This suggested that the world’s largest economy is experiencing a combination of high growth and low inflation, referred to in the market as a “Goldilocks” trend; giving investors an incentive to buy assets such as equities and high-yield bonds without having to fear tighter central bank policy.
“Friday’s US employment data was about as perfect a set of figures as you can get from a policymaker’s point of view. The increase in jobs was nothing short of amazing,” said Marshall Gittler, a strategist at ACLS Global, a currency brokerage. “In other words, it was a ‘Goldilocks’ report: not too hot, not too cold, just right.”
As a result, the S&P 500 surged more than 1.7 percent on Friday – its second-best day of the year so far – and the warm glow extended around the globe yesterday. Germany’s DAX led the gains in Europe, rising 0.9 percent, and MSCI’s world equity index, which tracks shares in 47 countries, hit a two-week high.
Earlier, MSCI’s index of Asia-Pacific shares outside Japan climbed 1.3 percent, poised for a third session of gains.
South Korea rose 1 percent, while Australia’s main index added 0.7 percent, boosted by mining shares on news that Australia could be exempt from new US trade tariffs on steel and aluminium imports.
Concerns over those tariffs have been weighing on European stocks, with the main pan-European stock index hitting a seven-month low at the start of the month. It has recovered somewhat from that trough to rise 0.3 percent yesterday.
The jobs news also lifted currencies such as the Mexican peso and the Canadian and Australian dollars, while weighing on the safe-haven yen. Those cross currents left the US dollar a shade lower against a basket of currencies.
Back to ‘Goldilocks’ Investors had trimmed holdings of yen last week on news that US President Donald Trump was prepared to meet with North Korean leader Kim Jong Un, a potential breakthrough in nuclear tensions in the region.
US officials on Sunday defended Trump’s decision, saying the move was not just for show and not a gift to Pyongyang.
“Now the US is back to ‘Goldilocks’, at least for now. The tariffs are less severe, and Kim and Trump are to meet,” said Shane Oliver, the Sydney-based chief economist at AMP. “We still expect more volatility this year, as many of these issues have further to run, but the broad trend in shares likely remains up.”
Brent crude gave up some of Friday’s gains, dropping 27 cents to $65.22 (R769.53) a barrel, as rising US output loomed over markets despite a slowdown in rig drilling activity.
Gold prices slipped 0.3 percent to $1 320.46 an ounce. – Reuters