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US and European stocks made cautious gains on Friday after weaker than expected US jobs market data failed to significantly curb bets on a Federal Reserve interest rate rise later this month.
Wall Street’s benchmark S&P 500 added 0.1 per cent and the tech-focused Nasdaq Composite gained 0.4 per cent, as both made headway recouping losses from the previous session.
In Europe, the region-wide Stoxx 600 index was up 0.1 per cent, while France’s Cac 40 climbed 0.4 per cent and Germany’s Dax added 0.5 per cent.
The gains came after the US Department of Labor released its closely watched employment report, which showed the economy created 209,000 jobs in June, fewer than 225,000 forecast in a Reuters poll of economists. The report was the first in 15 months to undershoot market expectations.
The US unemployment rate, however, edged down to 3.6 per cent last month, from 3.7 per cent in May, in a conflicting sign of labour market resilience that boosted the likelihood of the Fed increasing interest rates further to stamp out persistent inflation.
The majority of investors still expect that the central bank will increase rates in July, after the minutes from its previous meeting showed that most rate setters believed inflation remained unacceptably high, despite voting to temporarily pause their policy tightening campaign.
“Today’s US labour report was rather mixed, although markets appeared to focus on the negatives,” said Matthew Ryan, head of market strategy at financial services firm Ebury.
“We don’t think that today’s data will change things too much for the Federal Reserve. A 25 basis-point hike at the July [Fed] meeting still appears likely, with additional tightening beyond then to be largely determined by upcoming inflation prints,” he noted.
The yield on the policy-sensitive two-year Treasury note fell 0.07 percentage points to 4.93 per cent, a day after US borrowing costs hit a 16-year high. The yield on the benchmark 10-year note was flat at 4.04 per cent, remaining near its highest levels since early March. Bond yields fall as prices rise.
The dollar, which tends to strengthen when investors expect interest rates to go up, fell 0.8 per cent against a basket of six peer currencies following the US jobs report.
A day earlier, stocks across the US, Europe and Asia slid in a broad-based sell-off, after separate private sector jobs data showed a jump last month, reinforcing the likelihood that the Fed will resume interest rate rises.
“The labour market data is likely to become much more important than inflation data going forward . . . the main question for the central banks and markets would be when the economy is starting to show reasonable signs of a slowdown,” said Mohit Kumar, chief Europe financial economist at Jefferies.
In Asia, equities extended declines from the previous day, with Hong Kong’s Hang Seng shedding 0.9 per cent, and China’s CSI 300 down 0.4 per cent. Japan’s Topix declined 1 per cent.
Adding to investors’ woes, the Hang Seng Mainland Bank index declined 1.2 per cent, edging towards its lowest point since November 2022. The sector, which had already suffered amid a weakening economy, fell further after Goldman Sachs earlier in the week downgraded some of its top lenders.
