Interest Rates and Dollar Rise, Stocks Rise After Great US Jobs Report -February 2, 2024 at 9:36 PM

Interest Rates and Dollar Rise, Stocks Rise After Great US Jobs Report -February 2, 2024 at 9:36 PM
Interest Rates and Dollar Rise, Stocks Rise After Great US Jobs Report -February 2, 2024 at 9:36 PM
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(Adds comments in paragraphs 7-8, 17, updates prices at 3:00 PM ET (2000 GMT))

* Unexpectedly strong US jobs data dims hopes for interest rate cuts

* Amazon, Meta keep stock market sentiment high

* Shanghai Composite records worst week in 5 years

* Crude prices post weekly losses of 7%

NEW YORK/LONDON Feb 2 (Reuters) – Treasury yields jumped, the dollar rose and global stocks rose on Friday after a stellar U.S. jobs report dashed hopes for a near-term rate cut and highlighted a strong economy.

The non-labor force rose by 353,000 jobs in January, the Labor Department’s Bureau of Labor Statistics said, nearly double the 180,000 that economists polled by Reuters had forecast.

The yield on the benchmark 10-year Treasury Note soared above 4% and the dollar rose against all major currencies as employers added far more jobs than expected and the average hourly wage rose 0.6%, after rising from 0 .4% in December.

The figures came after the Federal Reserve on Wednesday rebutted market expectations for an imminent rate cut, with Chairman Jerome Powell warning that inflation was “still too high.”

“The market has been terribly wrong about the Fed’s near-term policy and this is another case where that is the case,” said Kevin Gordon, senior investment strategist at Charles Schwab in New York.

“The market has correctly assessed that the inflationary backdrop will help create the conditions for the Fed to cut,” he said. “But it is likely ultimately the labor market that will drive them to make cuts and will then determine the pace and magnitude of the cuts themselves.”

Job growth had slowed, especially in the fourth quarter of last year, but the jobs report showed job growth was accelerating, said Joseph LaVorgna, chief U.S. economist at SMBC Nikko Securities America.

“If you look at all the specific details, there were few if any weaknesses. It was just a very, very strong report and that alone suggests that a recession is certainly not on the horizon,” he said.

MSCI’s gauge of stocks around the world rose 0.74%, while on Wall Street the tech-laden Nasdaq and benchmark S&P 500 rose 1.86% and 1.30% respectively, as investors welcomed robust quarterly results from Meta Platforms and Amazon.com.

The Dow Industrials’ gains were slightly more muted, up 0.61%, but low unemployment and a strong economy suggest corporate profits could rise.

Meta rose 20.8% to hit an all-time high after issuing its first dividend days before Facebook’s 20th anniversary, along with a revenue and profit improvement on holiday shopping ad sales.

U.S. regional bank stocks recovered slightly from a brutal sell-off fueled by concerns that New York Community Bancorp’s dismal profit signaled broader problems for the sector.

Shares of NYCB rose 5.0% after plunging nearly 45% over the past two sessions after the lender cut its dividend and posted a surprise loss on commercial real estate loans.

In Japan, Aozora Bank fell to a three-year low after making a huge provision for losses on US office loans.

After the jobs report, money markets forecast that the Fed would cut its target interest rate, currently between 5.25% and 5.5%, by 123.3 basis points by the end of the year, down from 140.3 basis points just before the release of the data.

Futures lowered the odds of a rate cut in March to 20.5% from 36.5% just before the report and the odds of a 25 or 50 basis point cut in May to 61.4% from 91.6%, according to FedWatch Tool from CME Group.

“I’d rather trade in a stronger economy with fewer rate cuts than a weaker economy with more rate cuts,” said Keith Lerner, chief market strategist at Truist Wealth in Atlanta.

The two-year Treasury yield, which reflects interest rate expectations, rose 17.8 basis points to 4.372% and the 10-year yield rose 17 basis points to 4.033%. The 10-year’s rise was on track for the biggest one-day gain since September 2022, and the two-year since May 2023.

RISKS

Investors made short work of a major sell-off in the Chinese market, caused by a lack of hoped-for government stimulus.

The blue-chip CSI300 hit a five-year low, while the Shanghai Composite was 1.5% lower today and is down 6.2% this week, its biggest weekly loss since October 2018.

The dollar index, a benchmark for the U.S. currency against six others, rose 0.84% ​​to a seven-week high, while the euro fell 0.74% to $1.0792. The yen weakened 1.26% to 148.31 per dollar,

Oil prices fell about 2%, putting both benchmarks at weekly losses, given China’s faltering economy and ongoing geopolitical tensions.

Oil prices fell about 2% after U.S. jobs data lowered the likelihood of upcoming interest rate cuts, which could dampen crude demand if restrictive monetary policy slows the economy.

U.S. crude futures settled $1.54 lower at $72.28 a barrel, while Brent fell $1.37 to $77.33. Both benchmarks recorded losses of more than 2%. Both benchmarks posted losses of more than 7% for the week.

Gold prices fell as the dollar rose, making bullion more expensive for foreign buyers, and higher yields reduced the appeal of non-interest-bearing gold.

U.S. gold futures traded 0.8% lower at $2,053.70 an ounce.

The article is in Dutch

Tags: Interest Rates Dollar Rise Stocks Rise Great Jobs Report February

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