Wall Street stocks rallied Friday following strong jobs data, shrugging off worries about higher oil prices and monetary policy.
US hiring rose much more than expected last month, according to government data published Friday, adding 303,000 jobs in March.
While the report indicates economic health, futures markets raised the odds that the Federal Reserve will keep the interest rate flat at the June policy meeting, which has been seen as the first candidate for interest rate cuts.
Expectations of lower US interest rate cuts has fueled an equity rally in recent months.
“This latest data set shows the US economy isn’t losing heat,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown brokerage, with the jobs figures suggesting wages are likely to continue rising.
“Not only does this make the fight against inflation more difficult, it puts a potential pin in hopes for an interest rate cut in June,” she added.
Nevertheless, Wall Street’s three main indices advanced, with the broad-based S&P 500 index and tech-heavy Nasdaq Composite both gaining more than one percent.
Steve Sosnick of Interactive Brokers said some of the boost was a “relief” rally after Thursday’s sell-off in the wake of worries over Middle East tensions.
But Sosnick said data suggests markets should be more fixated on economic dynamics “rather than how many rate cuts we’re actually going to get.”
– ‘Escalation of tensions’ –
Global oil prices topped $91 a barrel as worries intensified that Israel’s war with Hamas could spiral into a broader conflict with major crude producer Iran.
That dampened sentiment in Asia and Europe, where major indices finished sharply lower.
“The risk-off tone to markets is driven by an escalation of tensions in the Middle East, after Israel said that it had increased preparations for a retaliatory strike by Iran after Israeli forces attacked Iran’s diplomatic compound in Syria earlier this week,” said XTB analyst Kathleen Brooks.
“Ever since the Israel/Hamas war started in October, the bigger risk for geopolitical security and thus for financial markets, has been a war between Iran and Israel,” she said.
That prospect sent oil prices up more than one percent Thursday, stoking fears of elevated global inflation that could delay rate reductions.
Gold struck a new record high of $2,328.46 per ounce. Gold prices have been benefitting from the prospect of a drop in global interest rates as well as concern over unsustainable government debt levels.
– Key figures around 2130 GMT –
New York – Dow: UP 0.8 percent at 38,904.04 (close)
New York – S&P 500: UP 1.1 percent at 5,204.34 (close)
New York – Nasdaq Composite: UP 1.2 percent at 16,248.52 (close)
London – FTSE 100: DOWN 0.8 percent at 7,911.16 (close)
Paris – CAC 40: DOWN 1.1 at 8,061.31 (close)
Frankfurt – DAX: DOWN 1.2 percent at 18,175.04 (close)
EURO STOXX 50: DOWN 1.1 percent at 5,014.75 (close)
Tokyo – Nikkei 225: DOWN 2.0 percent at 38,992.08 (close)
Hong Kong – Hang Seng Index: FLAT at 16,723.92 (close)
Shanghai – Composite: Closed for a holiday
Dollar/yen: UP at 151.61 yen from 151.34 yen on Thursday
Euro/dollar: UP at $1.0841 from $1.0837
Pound/dollar: DOWN at $1.2637 from $1.2642
Euro/pound: UP at 85.75 pence from 85.72 pence
Brent North Sea Crude: UP 0.6 percent at $91.17 per barrel
West Texas Intermediate: UP 0.4 percent at $86.91 per barrel
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