Global stocks rise, dollar gains after report dims view of US jobs market
NEW YORK/LONDON : MSCI's global equity index rose on Tuesday while the dollar firmed and Treasury yields climbed ahead of key inflation reports following a sharp downward revision in March U.S. employment levels.
The U.S. Labor Department said the economy likely created 911,000 fewer jobs in the 12 months through March than previously estimated, suggesting job growth was already stalling before President Donald Trump's aggressive tariffs on imports.
While the report painted a less rosy picture of the U.S. jobs market, investors noted it does not provide any information about job creation since March. Expectations that the Federal Reserve would start cutting interest rates this month remained intact after the revision.
But investors still plan on closely watching inflation data due out on Wednesday and Thursday, before the Fed makes its next policy decision on September 17.
"The more constructive way to look at this is that the economy has been just fine with half the job creation, and that's what the market has been digesting today," said Julia Hermann, global market strategist at New York Life Investments.
"The combination of a strong legacy of earnings, a constructive earnings outlook, paired with marginal Fed support between now and the end of the year, is the most constructive reason to continue participating in the equity market," she added.
RATE CUT BETS INTACT
Bets on a 25 basis point cut were intact while the probability for a jumbo 50 basis point reduction was at 8 per cent, per CME's FedWatch tool.
On Wall Street, all three major indexes gained ground and the S&P 500 managed a record closing high finishing up 17.46 points, or 0.27 per cent, at 6,512.61. The Dow Jones Industrial Average rose 196.39 points, or 0.43 per cent, to 45,711.34. The Nasdaq Composite also boasted a record closing high for its second day in a row, climbing 80.79 points, or 0.37 per cent, to 21,879.49.
MSCI's gauge of stocks across the globe rose 2.22 points, or 0.23 per cent, to 961.10. Earlier, the pan-European STOXX 600 index finished up 0.06 per cent. Emerging market stocks rose 12.06 points, or 0.94 per cent, to 1,294.26.
Political uncertainty in various countries has rattled currency and bond markets in the past few sessions.
French President Emmanuel Macron named loyalist Sebastien Lecornu, as his fifth prime minister in less than two years after opposition parties united to kick out center-right Prime Minister Francois Bayrou over his unpopular plans for budget tightening.
Investors were also mulling the resignation of Japan's prime minister, a defeat for Argentinian President Javier Milei's ruling party in local elections, and the abrupt replacement of Indonesia's finance minister.
After tumbling more than 13 per cent on Monday, Argentina's main stock index fell 0.3 per cent on Tuesday.
DOLLAR HIGHER
In currencies, the dollar gained against most currencies except against the yen, recovering from the previous day's losses, as investors consolidated positions ahead of key inflation reports this week.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.43 per cent to 97.81, with the euro down 0.49 per cent at $1.1704.
Against the Japanese yen, the dollar weakened 0.06 per cent to 147.42.
In Treasuries, yields rose as a long-end bond-buying frenzy abated, while the downward revision in jobs data validated a weakening labor market outlook that was already making a case for several Federal Reserve rate cuts this year.
The benchmark U.S. 10-year note yield rose 3.6 basis points to 4.082 per cent from 4.046 per cent late on Monday. The 30-year bond yield rose 3.6 basis points to 4.7263 per cent.
The 2-year note yield, which typically moves in step with interest rate expectations for the Fed, rose 5.5 basis points to 3.55 per cent, from 3.495 per cent.
In commodities, oil extended gains and settled higher after the Israeli military said it carried out an attack on Hamas leadership in the Qatari capital Doha.
U.S. crude settled up 0.59 per cent, or 37 cents, at $62.63 a barrel, and Brent ended the session at $66.39 per barrel, up 0.56 per cent or 37 cents.
Gold continued its record rally on expectations for a U.S. interest rate cut while investors looked ahead to the U.S. inflation data.
Spot gold fell 0.12 per cent to $3,631.12 an ounce. U.S. gold futures fell 0.17 per cent to $3,631.90 an ounce.
