NEW YORK, Aug 8 — US and global stock markets gained ground today, recovering from losses sparked by a strong US jobs report last week that bolstered the case for sharp interest rate hikes, while the dollar weakened and government bond yields fell.
On Wall Street, the Dow Jones Industrial Average rose 0.69 per cent to 33,029.18, the S&P 500 gained 0.70 per cent to 4,174.11 and the Nasdaq Composite added about 0.8 per cent to 12,759.00 in early trading.
Those gains echoed the broad Euro STOXX 600, which gained about 1 per cent today, led by cyclical and growth stocks, helping recover losses from Friday. Miners and technology stocks, hit hard in the previous week, led the gains.
The MSCI world equity index, which tracks shares in 47 countries, added 0.75 per cent, also recovering from losses on Friday.
Yet higher rates remained squarely in focus for investors.
“The rise in inflation and the Fed’s reaction to it has been a real headwind for valuations this year,” Morgan Stanley strategists wrote in a note today.
“However, it’s also been a tailwind for earnings. Now, we are on the other side of that mountain, and operating leverage is rolling over likely more than the consensus expects.” Indeed, business investment appears to be an early victim of red-hot US inflation and rising interest rates, according to fresh US government data.
The strong US jobs data raised the stakes for the July US consumer prices report due on Wednesday, which could see a slight pullback in headline growth, but likely a further acceleration in core inflation.
“Our economists expect the headline (annual) rate to finally dip after energy prices have fallen of late,” Deutsche Bank analysts wrote.
US Treasury yields dipped today as investors continued to digest the jobs report and how the Fed will react. Fed funds futures traders are now pricing for a 69 per cent chance of another 75-basis-point rate increase in September, and for the fed funds rate to rise to 3.65 per cent by March, from 2.33 per cent now.
Benchmark 10-year note yields fell to 2.794 per cent today, after getting as high as 2.869 per cent on Friday, the highest since July 22. Two-year yields were last 3.232 per cent, after reaching 3.331 per cent on Friday, the highest since June 16.
Bonds also got a safe-haven bid due to unease over Beijing’s sabre rattling against Taiwan as China conducts four days of military exercises around the island https://www.reuters.com/world/taiwan-says-chinese-planes-ships-carry-out-attack-simulation-exercise-2022-08-06.
Dollar expectionalism?
The US dollar fell 0.4 per cent versus a basket of currencies to 106.23, giving up some gains after strengthening on the jobs boom and the jump in yields.
FX analysts were bullish on the greenback’s prospects.
“Data like this will further any thoughts about ‘US exceptionalism’ and is very positive for the USD against all currencies,” said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank, referring to the US jobs statistics.
The euro squeezed out slim gains to reach US$1.021 (RM4.55).
Bitcoin and other cryptocurrencies, which tend to act as a barometer for risk appetite, gained. Bitcoin was last up 4.3 per cent at US$24,190.
Gold broke higher today as the dollar and Treasury yields retreated, with focus on US inflation numbers this week that could influence the Federal Reserve’s next rate hike. Spot gold rose 0.5 per cent to US$1,782.36 per ounce by 1252 GMT, after dropping 1 per cent in the previous session. US gold futures edged 0.4 per cent higher to US$1,798.40.
Erasing earlier gains, Brent crude futures fell about 0.8 per cent to US$94 a barrel. US West Texas Intermediate crude CLc1 was at US$88 a barrel, down about 1 per cent. — Reuters
