World shares recover after US jobs report sell-off

Tuesday, 9 August 2022 03:18 - - {{hitsCtrl.values.hits}}

LONDON (Reuters): Global stock markets gained ground on Monday, recovering from losses sparked by a strong US jobs report last week that bolstered the case for sharp interest rate hikes, while the dollar weakened and Government bond yields fell.

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

Yet the broad Euro STOXX 600 gained 0.8% in early trade on Monday, led by cyclical and growth stocks, helping recover losses from Friday driven by the US jobs report. Miners and technology stocks, hit hard in the previous week, led the gains.

The MSCI world equity index, which tracks shares in 47 countries, added 0.2%, recovering losses of the same amount seen on Friday.

S&P 500 futures and Nasdaq futures were up 0.5% and 0.6%, respectively. The S&P 500 had ended lower on Friday, weighed down by tech stocks.

Yet higher rates remained squarely in focus for investors. “Sectors like the higher rated tech stocks are still going to come under pressure for a while until we can see the Fed funds rate coming down,” said Close Brothers Asset Management Chief Investment Officer Robert Alster.

The jobs data raised the stakes for the July US consumer prices report due on Wednesday, which could see a slight pullback in headline growth, but likely a further acceleration in core inflation.

“Our economists expect the headline (annual) rate to finally dip after energy prices have fallen of late,” Deutsche Bank analysts wrote.

The risk of recession had earlier haunted equity markets, with MSCI’s broadest index of Asia-Pacific shares outside Japan dipping 0.5%.

After surging on Friday following the solid US non-farm payrolls data, most euro zone bond yields were lower. Germany’s 10-year Bund yield fell slightly to 0.89%.