Global stocks flirted with an all-time high on Friday, despite strong U.S. monthly jobs data dampening hopes of a Federal Reserve rate cut. The U.S. economy added 272,000 jobs last month, surpassing economists’ predictions of 185,000 hires. This unexpected report suggested a robust labor market, contradicting expectations of lower consumer prices.
Peter Cardillo, chief market economist at Spartan Capital Securities in New York, noted the positive impact of the jobs report on the economy and corporate earnings. However, it also reduced the likelihood of a rate cut in the near future.
Initially, the diminished hopes for a Fed rate cut weighed on stocks, but markets made a modest recovery by early afternoon. The MSCI’s world share index remained flat after reaching a record high. Wall Street also bounced back, with the S&P 500 and Dow Jones Industrial Average hitting all-time highs.
The benchmark 10-year U.S. Treasury yield surged over 14 basis points, its largest one-day increase in two months. The two-year yield also rose, tracking interest rate expectations.
Following the jobs report, market expectations for a rate cut shifted, with traders now anticipating a November start for rate reductions. This change came after the European Central Bank and Bank of Canada announced rate cuts earlier in the week.
Euro zone rate pricing adjusted following the U.S. jobs data, with traders now factoring in fewer rate cuts for the region this year. European stocks and bonds were also affected by the shifting market sentiment.
In currency markets, the dollar strengthened against a basket of currencies, while the euro weakened. Brent crude oil futures and spot gold prices were also impacted by the stronger dollar.
Overall, the markets reacted to the unexpected strength in U.S. jobs data, causing shifts in rate expectations and market performance.