NEW YORK, June 6 — An unexpected jump in US 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.
US nonfarm payrolls rose by 2.509 million jobs last month after a record plunge of 20.687 million in April. Economists polled by Reuters had forecast the unemployment rate jumping to 19.8 per cent in May and payrolls falling by 8 million jobs.
“The numbers are a huge surprise to the upside,” said Michael Arone, chief investment strategist at State Street Global Advisors. “It has confirmed what many folks were suggesting: that the effects on the labor market from the pandemic were temporary and that when the economy reopened and the infection rates started to diminish, that these jobs would come back.”
MSCI’s gauge of stocks across the globe gained 2.04 per cent. The index is now down 4.5 per cent for the year to date and trading at its highest level since early March, before the US economy went into lockdown in an effort to slow the spread of the novel coronavirus.
On Wall Street, the Dow Jones Industrial Average rose 829.16 points, or 3.15 per cent, to 27,110.98, the S&P 500 gained 81.58 points, or 2.62 per cent, to 3,193.93 and the Nasdaq Composite added 198.27 points, or 2.06 per cent, to 9,814.08.
The broad S&P 500 is now down about 1 per cent 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 per cent, reversing early losses to stay near a 12-week high.
The index is up about 7.6 per cent this week, on track for its best weekly showing since December 2011.
Emerging market stocks were up 0.7 per cent and also on course for their best week since December 2011.
Hopes for a swift economic recovery sank US government bonds, which had reached historic highs on fears that the pandemic would erode consumer demand. Benchmark 10-year notes last fell 20/32 in price to yield 0.8851 per cent, from 0.82 per cent late on Thursday.
“The sell-off in the bond market in the last few weeks seems to be justified,” said Subadra Rajappa, head of US rates strategy at Societe Generale. “This is a tremendously positive step in the right direction, and probably points to a faster recovery, at least in the jobs market, than people had expected.”
Bond investors will get further insight into the likely direction of the economy when the US Federal Reserve holds its regular two-day policy meeting next week.
Europe has now clawed back two-thirds of the losses incurred amid the coronavirus pandemic and Bank of America analysts said yesterday they expect European stocks to rise another 10 per cent by the end of September on expectations of a pickup in business activity.
Set for a third straight week of gains, the euro rose to US$1.1380 (RM4.86), its highest level since March 10 and was on course for a weekly jump of 2.5 per cent.
The dollar index made a tepid recovery, rising 0.08 per cent to 96.84, but remained on track for its third consecutive week of losses and close to its lowest in nearly three months.
Hopes for an economic recovery sent oil prices surging. US crude recently rose 4.97 per cent to US$39.27 per barrel and Brent was at US$42.14, up 5.38 per cent on the day. — Reuters
