The US dollar headed for its fourth straight weekly loss and bond yields fell yesterday after wage growth slowed in the monthly employment report, suggesting the Federal Reserve may not raise interest rates again soon.
Stock prices rose though on the creation of more jobs than expected in the US Labour Department jobs data, while President Trump’s executive order to review banking regulations introduced after the 2008 crisis also boosted financial sector stocks.
US non-farm payrolls increased by 227,000 jobs last month, the largest gain in four months, but the unemployment rate rose a 0.1 percentage point to 4.8 per cent and wages increased only modestly, suggesting that there was still some slack in the labour market.
The Dow Jones Industrial Average rose 175.57 points, or 0.88 per cent, to 20,060.48, the S&P 500 gained 16.18 points, or 0.71 per cent, to 2,297.03 and the Nasdaq Composite added 24.68 points, or 0.44 per cent, to 5,660.87.
US Treasury yields fell on the disappointing wage growth numbers, indicating inflation may not rise at a pace that would lead the Federal Reserve to raise interest rates soon as expected.
Benchmark 10-year Treasury prices rose 11/32 to yield 2.43 per cent and the lower yields undermined the US dollar, which had risen in early trading on expectations of a solid reading.
The US currency has been hit by uncertainty about policy direction created by President Trump’s flurry of executive orders in recent weeks after an initial burst of enthusiasm for the new administration’s promises of tax reform, infrastructure spending and financial deregulation.
Sterling steadied after its worst fall since October, while the euro was set for its sixth week of gains in seven, at $1.0790 and having gone as high as $1.0829 after the latest signs that growth and inflation are rising in the eurozone.
European stocks gained broadly with the STOXX 600 up 0.6 per cent, bouncing back from losses seen in the previous session.
The index remains negative for the week as caution about the impact of President Trump’s policies has weighed on a rally in risky assets.
Eurozone corporate earnings have been strong so far and a survey yesterday showed eurozone businesses started 2017 by increasing activity at the same multi-year record pace they set in December and faster growth in demand suggested the good times will continue.
MSCI’s all-world stock index, which tracks bourses in 46 markets around the globe, rose 0.6 per cent, on pace for its third day of gains and its largest one-day percentage gain in more than a week.
Oil prices rose after US threats of new sanctions against Iran.
Crude futures were up 1.1 per cent with Brent crude set to gain more than two per cent for the week.
London copper fell, however, after China’s tightening of policy spooked metals markets.
Gold rose 0.3 per cent.