Global Stock Markets Rally as US Jobs Market Cools
In Europe, stocks showed positive momentum, with Germany’s DAX climbing 0.7% to 15,949.69, while the CAC 40 in Paris gained 0.8% to reach 7,354.96. London’s FTSE 100 also posted a solid 0.8% increase, reaching 7,522.38.
Meanwhile, S&P 500 and Dow Jones Industrial Average futures both registered a 0.2% uptick. Notably, US markets remained closed for the Labor Day holiday.
Commenting on the situation, Tan Boon Heng of Mizuho Bank noted, “It appears that global markets are primed to be smitten with the idea of a ‘Nirvana’ Fed tightening outcome, entailing the ‘immaculate dis-inflation’ that does not cause employment pain.”
In addition to the positive jobs data, China’s financial regulators injected fresh stimulus into the struggling property sector, which bolstered buying sentiment. Measures included reduced down-payment requirements for first and second-time home buyers and lowered mortgage rates, as pointed out by Yeap Jun Rong of IG.
The Hang Seng index in Hong Kong surged by 2.5% to reach 18,844.16, while the Shanghai Composite index rose by 1.4% to 3,177.06. Tokyo’s Nikkei 225 also advanced by 0.7%, closing at 32,939.18.
Elsewhere in the region, the Kospi in Seoul saw a jump of 0.8% to 2,584.55, and Sydney’s S&P/ASX 200 added 0.6%, reaching 7,318.80. Stocks in Taiwan and Southeast Asia also saw gains.
Looking back at Friday’s Wall Street performance, the S&P 500 closed at 4,515.77 with a 0.2% increase, while the Dow Jones Industrial Average rose 0.3% to 34,837.71. The Nasdaq composite experienced a marginal dip of less than 0.1%, ending at 14,031.81, breaking a five-day winning streak.
The Labor Department’s Friday report indicated that employers added 187,000 jobs in August, reflecting a slight improvement from July’s revised gain of 157,000. However, this data still suggested a slowdown in hiring compared to earlier this year, with the economy adding 449,000 jobs from June through August, marking the lowest three-month total in three years. The report also revealed an uptick in the unemployment rate, which rose to 3.8% from 3.5%, although it remained historically low.
Strong hiring and consumer spending have played a crucial role in averting a potential recession in 2023. Nevertheless, these factors have complicated the central bank’s efforts to control inflation by fueling wage and price increases.
Market concerns that the Federal Reserve might need to maintain higher interest rates for an extended period, driven by reports indicating the US economy’s resilience, contributed to a market pullback in August. However, recent economic indicators have reinforced the belief on Wall Street that the Fed might opt to keep rates steady at its upcoming September policy meeting.
The US central bank has aggressively raised its main interest rate since 2022, reaching the highest level since 2001. The objective has been to curb inflation and bring it in line with the Fed’s target of 2%. The Fed has maintained its readiness to continue raising interest rates if necessary, with decisions guided by the latest economic data.
Among S&P 500 companies, banks and financial services stocks accounted for a significant portion of gains. Charles Schwab saw a rise of 2.3%, and U.S. Bancorp added 1.5%. Rising oil prices also boosted energy stocks, with benchmark US crude oil prices surging by 2.3%. Exxon Mobil and Chevron both posted gains of 2.1% and 2%, respectively.
In early Monday trading, US benchmark crude saw a minor decline of 11 cents, settling at $85.44 a barrel, while Brent crude oil lost 6 cents, reaching $88.49 a barrel.
In the currency market, the US dollar strengthened to 146.36 Japanese yen from 146.22 yen late on Friday, while the euro made a modest gain, rising to $1.0793 from $1.0779.