World stocks rise as US jobs machine calms slowdown fears

Global stock markets rose on Friday, their mood lifted by US jobs data assuaging fears of a slowdown in the world’s top economy, analysts said. American employers added a total of 136,000 net new positions in September, below expectations.

But whatever disappointment the data brought was offset by an upward revision in August figures and another drop in the unemployment rate, to a 50-year low. Wage growth was weak, however.

Analysts said the jobs report was “mixed”, and kept expectations of a Federal Reserve rate cut very much alive.

The Fed has “enough ammunition to commit to another rate cut,” judged Edward Moya at Oanda. The central bank may, however, hold off from promising an entire easing cycle when Fed chiefs meet later this month, he said.

Markets appeared “to find some relief” from the jobs report, and went some way towards easing fears of a recession, said analysts at Charles Schwab.

In Europe, stocks were jolted out of earlier softness by the data to end the week firmly in the black, while Wall Street was also stronger in the late New York morning.

Traders reported investors switching out of Treasury bonds and gold into stocks as some appetite for risk returned.

Still, many remained worried by earlier data suggesting that the US is now feeling the effects of its long-running trade war with China. On Thursday a measure of the crucial services sector came in at its lowest for three years.

“There was nothing in the US employment report published today to change our view that the US economy will slow further and that the Fed will cut rates only one more time in this cycle,” said Hubert de Barochez at Capital Economics.

The dollar fell against both the euro and the yen as rate cut expectations took hold, with only the Brexit-ridden pound failing to outperform the greenback.

 Earlier, stock markets in Asia finished mostly lower, with Hong Kong marking the heaviest drop. Property firms were among the worst hit, as demonstrators took to the streets again to protest the imposition of a law banning face masks following months of sometimes violent protests.

Mumbai fell 0.7 per cent after the Indian central bank announced a rate cut as expected but slashed its economic growth outlook. Shanghai was closed for a holiday.

Hong Kong sank 1.1 per cent as the city’s government announced the face mask ban as it looks to quell the demonstrations that have rocked the economy.

But there are worries that the rarely-used colonial-era emergency power could lead to further confrontations or more, stricter laws later.

Gold rose on Friday on growing fears of a global economic slowdown and rising expectations of more US interest rate cuts, with investors now looking for cues from US jobs data.

Spot gold was up 0.3% at $1,509.66 an ounce by 1128 GMT, having climbed to its highest since Sept. 25 at $1,518.50 in the last session. Prices are on track for a weekly gain of about 0.8%.

US gold futures were up 0.1% at $1,515.50. “We’ve received more evidence that global growth is struggling. We most likely have a global manufacturing recession and there is a risk that this spills over into the services, which is why gold has recovered quite rapidly after that sell-off last week,” said Julius Baer analyst Carsten Menke.

“Fundamentals for gold are still positive, we have slowing global growth, lingering trade tensions and we see more rate cuts by the Fed. So this is an environment where gold should prosper and prices should be at $1,575 towards the end of the year.” Data from the United States showed services sector activity slowed to a three-year low in September, following the manufacturing sector, which contracted to the weakest level in a decade. Hiring by US private employers also slowed further last month.

Investors will now scan the US non-farm payrolls report due at 1230 GMT for clarity on the health of the world’s biggest economy.

European stocks rose slightly, helped by hopes of easing measures by the Fed, but were on track for their worst weekly performance in a year.

Two US Fed policymakers on Thursday signalled they are open to delivering another rate cut, while Vice Chairman Richard Clarida said the central bank “will act as appropriate to sustain a low unemployment rate and solid growth and stable inflation”.

“Fed Chair Jerome Powell stated in July that this (rate cut) step was just an insurance against international risks and not the beginning of a new cycle, but in September it became clear it is a cycle and now more FOMC members are being supportive to rate cuts,” said Quantitative Commodity Research analyst Peter Fertig.

“Yields are declining again, stocks are not performing well, the US dollar is flat, which is all supportive to gold.” Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar.

Elsewhere, platinum fell 0.9% to $881.90 an ounce and was down over 5% this week, its biggest weekly decline since May.

Silver rose 0.2% to $17.59, and palladium climbed 0.3% to $1,658.99, but is set for a 1.3% fall on the week, after eight weekly gains.

Reuters