The dollar slipped against the euro and global equity markets rebounded yesterday after data showed US jobs growth slowed in August, raising the prospect that interest rates will stay low longer than investors had expected.
The dollar fell after data showed US nonfarm payrolls grew by only 142,000 last month, far below the 225,000 forecast by analysts in a Reuters poll. The July figure was revised upward to 209,000.
Major US stock indexes pared losses to move into positive territory, while Germany’s DAX and Spain’s IBEX rebounded to close higher. MSCI’s all-country index of performance in 45 countries cut losses to trade flat.
Investors took the surprisingly weak jobs data as a sign the Federal Reserve will not boost rates any time soon.
“One of the big fears of this market, maybe the only fear, has been rapidly rising interest rates. This puts an end to those thoughts in the near term,” said Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.
Mohamed El-Erian, chief economist at Allianz in Newport Beach, California, said although the payrolls report was disappointing, it was more solid in key components, such as improvement in the unemployment rate to 6.1 per cent.
“All this will reinforce the Federal Reserve’s ‘steady as she goes’ policy approach,” El-Erian said.
The Dow Jones industrial average rose 44.09 points, or 0.26 percent, to 17,113.67. The S&P 500 added 6.37 points, or 0.32 per cent, to 2,004.02 and the Nasdaq Composite gained 10.43 points, or 0.23 per cent, to 4,572.72.
In Europe, the FTSEurofirst 300 index of top regional shares pared losses to close down 0.35 percent at 1,396.02. MSCI’s all-country index was off 0.02 per cent.
The dollar retreated from a nearly six-year high against the yen and the euro recovered from a 14-month low against the greenback a day after a surprise European Central Bank rate cut.
The euro edged up 0.1 per cent against the dollar at $1.2957 after shedding 1.6 per cent on Thursday, its steepest fall in almost three years, after the ECB cut rates to record lows to avert deflation.
On the EBS trading system, the dollar last traded down 0.23 per cent at 105.02 yen after it touched a nearly six-year high of 105.71 yen in Asian trading.