October 6, 2022

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Global stocks rebounded after US jobs report heavy selling

Global stocks rebounded after US jobs report heavy selling

  • Euro Stoxx gains 0.8%
  • Wall Street braces for gains
  • Markets are narrowing down the odds for a 75 basis point rise ahead of the US CPI.
  • The dollar goes down
  • Oil compensates for its early losses, and tries to rise

LONDON/SYDNEY (Reuters) – Stocks rose on Monday, recovering after last week’s strong US jobs report boosted the case for more big interest rate increases, while the dollar weakened and government bond yields tumbled.

Markets quickly moved to pricing in about a 70% chance that the US Federal Reserve would raise interest rates by 75 basis points in September, sending the two-year yields up 20 basis points on Friday and inverting the curve further. Read more

But the wide Euro Stoxx 600 (.stoxx) It gained as much as 0.8% in early trading, led by cyclical stocks and growth stocks, helping to recover losses from Friday triggered by the US jobs report. Miners (.SXPP) and technology (.SX8P)which had been hit hard in the previous week, led to early gains.

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MSCI World Stock Index (.MIWD00000PUS)which measures stocks in 47 countries, added 0.2%, offsetting losses by the same amount seen on Friday.

S&P 500 and Nasdaq futures rose 0.3% and 0.4%, respectively. The S&P 500 finished lower on Friday, dragged down by technology stocks.

However, market players are still looking at the risks of higher prices.

“Sectors like top-rated tech stocks have been under pressure for a while so we can see the fed funds rate come down,” said Robert Alster, chief investment officer at Close Brothers Asset Management.

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The jobs data raised the risks for the US consumer price report for July due on Wednesday, which could see a slight dip in core growth, but an additional acceleration in core inflation is likely.

Deutsche Bank analysts wrote: “Our economists expect the headline (annual) rate to finally fall after the recent drop in energy prices.”

The threat of a recession was haunting stock markets earlier, with the broadest MSCI Asia Pacific Index outside of Japan (MIAPJ0000PUS.) 0.5% dipping.

After rallying on Friday after strong US non-farm payrolls data, most Eurozone bond yields were lower. The German 10-year bond yield fell slightly to 0.90%.

Two-year Treasury yields rose 3.19%, 40 basis points higher than 10-year Treasury yields.

The bonds also received a safe haven offer due to concern over Beijing’s military conflict against Taiwan as China conducts four days of military exercises across the island. Read more

extraordinary dollar

The US dollar fell 0.3% against a basket of currencies to 106.32, giving up some gains after strengthening as jobs boomed and yields jumped.

It settled against the Japanese yen at 135.07 yen, after jumping 1.6% on Friday.

“This key data point is a million miles from the current recession, both on the basis of employment change, and on the basis of unemployment levels,” said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank, referring to the US job statistics.

“Data like this will heighten any thoughts of ‘US exceptionalism’ which is very positive for the US dollar against all currencies.”

The euro trimmed its meager gains to reach $1.021.

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The currency was not affected by the news that Moody’s lowered Italy’s outlook to negative as the resignation of Prime Minister Mario Draghi rocked the country’s political landscape. Read more

Gold managed to rebound from Friday’s lows, rising 0.3% to $1,773.

Oil prices pared early losses to offset some of the gains, after suffering their worst week since April on fears of halting global demand as central banks continue to tighten.

Brent crude rose 0.7 percent to $95.73, while US crude rose 0.6 percent to $89.55 a barrel.

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Additional reporting by Tom Wilson in London and Wayne Cole in Sydney; Editing by Jacqueline Wong and Bradley Perrett

Our criteria: Thomson Reuters Trust Principles.