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Equities rebound as jobs data quash rate hike fears

·3-min read
The worse-than-expected jobs figures added fuel to the debate over expanded US unemployment benefits

Equity markets moved higher while the dollar fell on Friday after tepid job US growth numbers assuaged fears of a rapid reduction in stimulus measures and interest rate hikes.

The start of a Group of Seven finance ministers meeting drew investors' attention as well, with Europeans optimistic the world's wealthiest countries will support US-backed plans for a global minimum corporate tax.

US Labor Department data released before Wall Street trading began showed the world's largest economy added 559,000 jobs in May, below expectations for the second straight month but an improvement on April.

That was good news for equities, as investors have feared the roaring return of the US economy would push the Federal Reserve to "taper" stimulus measures sooner than markets have been expecting.

"This employment report was not too hot, not too cold obviously and I think that the fact that we didn't see any big hike in the wages suggests that the Fed is not going to be in a hurry to accelerate any tapering debate sooner than anticipated," said Peter Cardillo of Spartan Capital Securities.

The Dow ended up 0.5 percent while the tech-rich Nasdaq added 1.5 percent.

Before the closely-watched data was released, investors had been bracing for a jobs boom, after reports Thursday showed US private employers adding nearly one million positions in May and new unemployment benefit requests falling below 400,000 last week for the first time since the pandemic began.

"The key takeaway from the report is that it shows there is still ample room for improvement, which is apt to register in the Fed's mind as a basis for sticking with its patient-minded policy approach," said Briefing.com analyst Patrick O'Hare.

- Taper fears -

The highly accommodative monetary policies of the Fed and other central banks have been key drivers of the blockbuster rally in world equities after they cratered at the start of the pandemic.

But there have been growing concerns on trading floors that too strong a rebound in the economy will set off a boom in inflation, forcing the Fed to begin to wind down its vast bond-buying program or even lift interest rates to prevent overheating.

CMC Markets analyst Michael Hewson said the jobs figure was "helping to support a view, that for all of the recent talk of a possible central bank retreat of support measures, that any such action was likely to be later rather than sooner."

And US central bankers have remained adamant that it is too soon to pull back on the stimulus measures.

- Key figures around 2025 GMT -

New York - Dow: UP 0.5 percent at 34,756.39 (close)

New York - S&P 500: UP 0.9 percent at 4,229.89 (close)

New York - Nasdaq: UP 1.5 percent at 13,814.48 (close)

EURO STOXX 50: UP 0.3 percent at 4,089.38 (close)

London - FTSE 100: UP less than 0.1 percent at 7,069.04 (close)

Frankfurt - DAX 30: UP 0.4 percent at 15,692.90 (close)

Paris - CAC 40: UP 0.1 percent at 6,515.66 (close)

Tokyo - Nikkei 225: DOWN 0.4 percent at 28,941.52 (close)

Hong Kong - Hang Seng Index: DOWN 0.2 percent at 28,918.10 (close)

Shanghai - Composite: UP 0.2 percent at 3,591.84 (close)

Euro/dollar: UP at $1.2167 from $1.2129 at 2130 GMT

Pound/dollar: UP at $1.4162 from $1.4104

Euro/pound: DOWN at 85.90 pence from 85.96 pence

Dollar/yen: DOWN at 109.51 yen from 110.30 yen

Brent North Sea crude: UP 0.5 percent at $71.63 per barrel

West Texas Intermediate: UP 0.8 percent at $69.37 per barrel

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