The dollar, Wall Street futures and benchmark bond yields were quick to recover from an initial flinch yesterday, after weaker-than-expected US jobs data disappointed on a number of fronts.
Headline jobs growth slowed more than expected in August, the data showed after two straight months of strong gains, while average hourly earnings rose three cents, or 0.1 per cent, versus forecasts of 0.2 per cent.
The pace of the headline increase should still be enough, though, to keep the Federal Reserve on course to start reducing the massive portfolio of bonds it bought up to help the United States economy through the financial crisis, analysts said.
But it could make the central bank think more carefully about whether it wants to raise interest rates for a third time this year.
The dollar’s immediate reaction had been to fall smartly against the euro, to $1.1979 and to 109.57 yen, but within 20 minutes it was back up to $1.1906 and 110 yen as markets reversed course.
“It’s a little bit of a disappointment. The labour market’s doing fine but not quite as strong as people thought going into this number,” said Scott Anderson, chief economist, Bank of the West in San Francisco.
US stocks futures were buffeted too. Having dipped immediately after the jobs numbers, they also perked up and the main S&P 500, Dow and Nasdaq markets all looked set to open around 0.3 per cent higher.
All three major indexes were on track to post gains for the second straight week, though trading volume is expected to remain muted as investors head into the Labour Day weekend.
Overnight gains for Europe and Asia were already pushing world shares back towards record highs.
Euro zone stocks had been at risk of their second red week in a row but a 0.8 per cent rise looked to have dug them out of trouble.
Near six per cent jumps in French media firm Vivendi and Swedish car and truck maker Volvo lifted spirits, as did a rise in euro zone manufacturing data that showed the fastest rise in export orders since February 2011.
On-form mining companies remained hot as copper, and iron ore headed for their eighth straight week of gains.
There was also some relief that the euro’s rapid increase seemed to have paused for now and that this year’s 13 per cent rise versus the dollar and five per cent on a trade-weighted basis does not appear to have hurt firms just yet.