US and European shares gained yesterday after weaker-than-expected US monthly jobs data gave the Federal Reserve more leeway to stand pat on interest rates this month, while the dollar gained and longer-dated Treasury yields edged up.
US non-farm payrolls rose by 151,000 jobs in August after an upwardly revised 275,000 increase in July, with job cuts in manufacturing and construction, the Labour Department said.
Economists polled by Reuters had forecast payrolls rising 180,000 last month.
Fed funds futures yesterday suggested traders saw a 24 per cent probability of a Fed rate hike later this month, roughly unchanged from Thursday’s probability, according to CME Group’s FedWatch programme.
Rate hike probabilities for September and December had risen after last Friday’s remarks by Fed Chair Janet Yellen that the case for raising rates had strengthened in recent months.
US and European shares cheered the jobs figures’ implication that the Fed may still wait until December to act.
“This mixed jobs report puts the Fed in a tricky situation. It’s not all-around strong enough to assure a September interest rate hike. But it’s solid enough to engender a heated policy discussion,” said Mohamed El-Erian, chief economic adviser at Allianz, in Newport Beach, California.
MSCI’s all-country world equity index was last up 2.62 points or 0.63 per cent, at 419.97.
The Dow Jones industrial average added 85.78 points, or 0.47 per cent, at 18,505.08. The S&P 500 was up 8.46 points, or 0.39 per cent, at 2,179.32. The Nasdaq Composite was up 20.82 points, or 0.4 per cent, at 5,248.02.
Europe’s broad FTSEurofirst 300 index was up 2.17 per centat 1,380.43.
Despite the jobs data not clearly reinforcing a September rate hike, the dollar gained on the prospect of a December rate hike.
The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.23 per cent at 95.874 after hitting a one-week low of 95.189.
Treasuries prices initially rallied on the US jobs data, with two-year yields falling to their lowest in 10 days of 0.746 per cent and benchmark 10-year yields hitting a one-week low of 1.543 per cent.
Yields reversed that drop later in the session, with two-year yields last little changed at 0.806 per cent and 10-year yields last at 1.618 per cent, compared with a 10-year yield of 1.570 per cent late Thursday.
The dollar’s initial weakness helped prompt gains in oil prices, though crude futures remained on track for a big weekly loss on glut concerns.
Brent crude was last up $1.35, or 2.97 per cent, at $46.8 a barrel. US crude was last up $1.27, or 2.94 per cent, at $44.43 per barrel.
The lack of clarity about a rate hike from the Fed boosted gold. Spot gold prices were last up $5.4601 or 0.42 per cent, at $1,318.93 an ounce.