Friday 21.00 GMT
What you need to know
- Nasdaq Composite index hits record high
- Headline US job creation powers through forecasts
- Tepid wage growth pegs back dollar
- South Korea stocks, won rise on Trump-Kim meeting
- Yen hit as improving risk appetite draws investors from havens
Global stocks closed out the week on a strong note — with the Nasdaq Composite index hitting a record high — as the latest US jobs report painted a picture of a “Goldilocks” labour market and hopes grew that relations between the US and North Korea could improve.
US non-farm payrolls increased by 313,000 last month, easily beating forecasts and the biggest increase in 18 months. However, wage growth was subdued with average hourly earnings edging up by just 0.1 per cent, which pulled the year-on-year increase down to 2.6 per cent.
“The February employment report showed that both the demand and supply of labour increased, preventing wage pressures from picking up,” said Joseph Song, economist at BofA-Merrill Lynch.
“Today’s ’Goldilocks’ report suggests the business cycle still has another leg to go.”
The blockbuster headline payroll number provided a fresh boost to global stocks, although the tepid wage growth left the dollar struggling — even as Fed fund futures moved to reflect a slightly higher probability of four US rate rises this year.
The 10-year Treasury yield briefly climbed back above 2.9 per cent to its highest since Jay Powell, chairman of the Federal Reserve, gave an upbeat assessment of the US economy to Congress at the end of February.
Meanwhile, global stocks also got a lift from the extraordinary news that President Trump would meet Kim Jong Un within weeks, after North Korea offered to suspend nuclear and missile tests. But there were concerns about the rapid pace of the efforts to reduce friction between Washington and Pyongyang.
“The move itself is positive,” said Raphie Hayat, senior economist at Rabobank. “Whether the outcome will be positive remains to be seen.”
The news dented demand for the yen, widely viewed as a “haven” currency, as well as driving South Korean stocks and the won sharply higher.
The North Korea news came hard on the heels of confirmation that tariffs would be imposed on US imports of steel and aluminium.
But the move was watered down somewhat as Canada and Mexico were exempted while Nafta negotiations continued, and US allies were invited to negotiate possible exemptions as well. Both the Canadian dollar and Mexican peso rallied against the dollar.
Mr Hayat at Rabobank warned that in spite of the softer stance taken by Mr Trump, the pre-conditions for a global trade war were still being set up.
“Mr Trump has made the first move, the EU has already reacted — at least on paper — with measures of its own, and China has also promised a ‘necessary response’,” he said.
Elsewhere, oil prices rallied strongly after two days of hefty losses that were largely driven by concerns about rising supply.
The euro was steady against the dollar after sliding on Thursday as Mario Draghi, European Central Bank president, put a dovish spin on the Bank’s decision to drop its easing bias.
On Wall Street, the S&P 500 rose 1.7 per cent to 2,786, for a weekly rise of 3.5 per cent. The Dow Jones Industrial Average rose 1.8 per cent on Friday while the Nasdaq Composite also added 1.8 per cent as it closed at a record high.
Across the Atlantic, the Europe-wide Stoxx 600 rose 0.4 per cent, although the Xetra Dax in Frankfurt ended 0.1 per cent lower. The FTSE 100 in London added 0.3 per cent.
In Japan the Topix jumped as much as 1.8 per cent following the North Korea announcement, before pulling back to close 0.3 per cent higher.
Hong Kong’s Hang Seng gained 1.1 per cent to a one-week high and the CSI 300, composed of Shanghai and Shenzhen companies, rose 0.8 per cent.
Forex and fixed income
The euro was barely changed against the dollar at $1.2306 — having earlier hit $1.2334 — while the US currency was 0.6 per cent higher versus the yen at ¥106.82. The Bank of Japan left monetary policy on hold on Friday.
The euro’s steadier tone followed a choppy session on Thursday after the European Central Bank dropped its pledge to increase quantitative easing if the inflation outlook or financial conditions worsened, while its president’s later comments were deemed more dovish.
The US dollar was down 0.6 per cent against its Canadian namesake and 0.1 per cent lower versus the Mexican peso.
The yield on the 10-year Treasury was up 3 basis points at 2.90 per cent, but off an earlier peak of 2.914 per cent. The two-year US yield was 1bp higher at 2.27 per cent.
Oil prices were on course to snap two days of falls that followed the release of data from the Energy Information Administration showing US crude stocks had risen last week.
Brent crude settled at $65.49 a barrel, up 3 per cent, for a weekly advance of 1.7 per cent. US West Texas Intermediate was 3.1 per cent higher in late trade at $62.01.
Gold was flat at $1,322 an ounce, and barely changed over the five-day period.
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
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