(Reuters) – Global stock markets gained on Monday, recovering from losses triggered by last week’s strong US jobs report that strengthened the case for a sharp interest rate hike, while the dollar weakened and government bond yields tumbled.
On Wall Street, the Dow Jones Industrial Average (.DJI) The S&P 500 rose 0.84% to 33,079.21 (.SPX) It rose 0.89% to 4,181.88 and the Nasdaq Composite Index (nineteenth) It added 1.28% to 12820.00 in late morning trading. Read more
These gains echoed the Euro Stoxx 600 index (.stoxx), which rose about 1% on Monday led by cyclical stocks and growth stocks, helping to recover losses from Friday. Read more
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MSCI World Stock Index (.MIWD00000PUS)which measures stocks in 47 countries, added 0.83%.
However, high rates remained in focus for investors.
“Rising inflation and the Fed’s reaction to it have been a real headwind to valuations this year,” Morgan Stanley strategists wrote in a note on Monday. “However, it has also been a tailwind for earnings. Now, we’re on the other side of that mountain, and operating leverage is probably fluctuating more than the consensus expects.”
Indeed, business investment appears to have been an early victim of severe US inflation and rising interest rates, according to new US government data. Read more
Strong US jobs data raised the risks for the US consumer price report for July due on Wednesday, which could see a slight dip in core growth, but a further acceleration in core inflation is likely.
“We see inflation remaining above the Fed’s 2% target over the next year,” strategists at the BlackRock Investment Institute wrote in a note Monday. “We believe the Fed will continue to respond to calls to tame inflation until it recognizes how that growth has stalled.”
US Treasury yields fell on Monday as investors continued to digest the jobs report and how the Fed will react. Fed fund futures traders are now pricing in a 69% chance of another 75 basis point rate increase in September, and for the fed funds rate to rise to 3.65% by March, from 2.33% now.
Benchmark 10-year yields fell to 2.782% on Monday, after rising to 2.869% on Friday, the highest since July 22. The two-year bond yield was 3.211%, after hitting 3.331% on Friday, the highest since June 16. .
dollar forecast?
The US dollar fell nearly 0.5% against a basket of six major currencies to 106.19, giving up some gains after strengthening as jobs boomed and yields jumped.
Currency market analysts were optimistic about the dollar’s outlook.
“Data like this will add to any thoughts of ‘US exceptionalism’ and it is very positive for the US dollar against all currencies,” said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank, referring to US jobs statistics.
The euro trimmed its meager gains to reach $1.021.
Bitcoin and other cryptocurrencies have gained, which tends to act as a measure of risk appetite. Bitcoin was last up 4.3% at $2,4194.
Gold broke higher on Monday as dollar and treasury yields tumbled. Spot gold rose 0.8 percent to $1,787 an ounce by 1252 GMT, after falling by 1 percent in the previous session. US gold futures rose 0.56% to $1,782.
Oil prices hovered near multi-month lows on Monday as persistent concerns about weak demand on the back of a dark economic outlook overshadowed some positive economic data from China and the United States. Read more
US crude fell 0.26% to $88.78 a barrel, and Brent crude closed at $94.95, flat on the day.
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(Additional reporting by Lawrence Delevingne in Boston and Tom Wilson in London.) Additional reporting by Wayne Cole in Sydney; Editing by Andrew Heavens and Bernadette Baum
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