US stocks gained and the dollar slipped on Friday after a key report showed the economy added more jobs than forecast last month, adding to pressure on the Federal Reserve to maintain its aggressive stance on inflation.
The blue-chip S&P 500 jumped 0.9 per cent, while the tech-heavy Nasdaq Composite rallied 0.6 per cent. In Europe, the regional Stoxx Europe 600 added 2.3 per cent, recouping the 0.9 per cent loss it made in the previous session.
The US dollar index, which tracks the currency against six major peers, fell 1.5 per cent. The move came after comments from US central bankers Thomas Barkin and Susan Collins, which implied that the Fed was close to slowing the pace at which it raises borrowing costs.
The US added 261,000 jobs in October, according to the labour department, ahead of a consensus estimate of 200,000 compiled by Bloomberg. The unemployment rate increased by 0.2 percentage points to 3.7 per cent in October, higher than the 3.6 per cent predicted.
Wages, meanwhile, rose 0.4 per cent from the previous month, the report showed — higher than the 0.3 per cent rise forecast.
Antoine Bouvet, senior rates strategist at ING, said Fed chair Jay Powell’s “hawkish turn” earlier in the week made sense given how high inflation remains, with Friday’s jobs data providing further vindication: “It’s the icing on the cake.”
But Quincy Krosby, chief global strategist at LPL Financial, said the jobs report bolstered the argument for a smaller 0.5 percentage point rise at the Fed’s December meeting and “helped the equities market” because higher unemployment figures implied payroll numbers are “shifting lower but not collapsing”.
The Fed implemented its fourth consecutive 0.75 percentage point rate rise on Wednesday as it attempts to bring inflation down to its target of 2 per cent. Powell’s warning that recent data suggest “the ultimate level of interest rates will be higher than expected” sent US stocks lower and led to a sharp jump in US short-term government bond yields.
The yield on the two-year Treasury, which is particularly sensitive to short-term monetary policy expectations, retreated from its Thursday peak, when it reached its highest level since mid-2007. The yield on the note fell 0.02 percentage points to hit 4.68 per cent on Friday. Yields rise when prices fall.
The yield on the 10-year US Treasury gained 0.03 percentage points to 4.15 per cent. Longer-term debt normally yields more than short-term notes and so-called inversions of the yield curve have preceded every US recession for the past 50 years.
Chinese stocks soared, extending their weekly gains on hopes that Beijing would change its longstanding zero-Covid policy. The CSI 300 index of Shanghai and Shenzhen-listed shares gained 3.3 per cent.
That also spurred gains for mining groups Anglo American, up 7.4 per cent, and Rio Tinto, up 8.2 per cent in London. The FTSE 100 rose 2.3 per cent.
Reports that US regulators had completed a review of Chinese audit reports earlier than expected added to investor optimism around Chinese stocks, with the Hang Seng in Hong Kong closing up 5.4 per cent.