Stocks dip, oil climbs in wake of strong U.S. jobs report

By Pete Schroeder and Elizabeth Howcroft

WASHINGTON/LONDON (Reuters) -Wall Street dropped and oil jumped Friday morning after a strong jobs report in the United States suggested the Federal Reserve may have further to go to cool off the economy and stifle inflation.

Strong data from the U.S. Labor Department, which reported the United States added more jobs than expected in June, indicated a recession was not yet imminent amid persistent job growth, and gives the Fed ammuniation to deliver another large interest rate increase later this month.

Nonfarm payrolls jumped by 372,000 jobs in June, well above economist expectations. The unemployment rate held steady at 3.6%.

All three U.S. stock indices opened lower Friday after the report, as investors prepared for more rate hikes.

The Dow Jones Industrial Average fell 0.17% in early trading, while the S&P 500 dropped 0.39% and the Nasdaq Composite shed 0.71%.

“We are still in the case where bad news is good news and good news is bad news. So that’s going to be the case until there’s some perception and sentiment that the Federal Reserve Bank has accomplished or is accomplishing their goal of moderating the growth of the economy and breaking the back of the inflation cycle that started last year,” said Tom Plumb, portfolio manager at Plumb Balanced Fund in Milwaukee.

Oil jumped in the Friday morning trade, but likely was still facing a weekly decline after a steep selloff earlier in the week on concerns over dwindling demand amid rising rates and cooling economies.

Brent crude was last up 1.1%, at $105.8 a barrel. U.S. crude was last up 1.28%, at $104.04 per barrel.

The dip on Wall Street came after European shares edged higher on Friday and were set for a small weekly gain, boosted by optimistic comments from Fed officials and news of Chinese fiscal stimulus on Thursday.

Fed Governor Christopher Waller called recession fears “overblown”, while St. Louis Fed Bank President James Bullard said he saw a “good chance” of a soft landing for the economy.

But Asian shares gave up some of their gains and the safe-haven Japanese yen rose after news that Abe, Japan’s longest-serving leader, had been shot while campaigning for a parliamentary election.

Abe stepped down in 2020 citing ill health, but he has remained a dominant presence over the ruling Liberal Democratic Party (LDP), controlling one of its major factions.

The MSCI world equity index, which tracks shares in 45 nations, was down 0.14%.

The dollar index was up 0.2% on the day after earlier hitting its highest level since 2002.

The British pound was down 0.2% against the stronger dollar after Prime Minister Boris Johnson resigned on Thursday. ING analysts said markets likely welcomed the change in leadership but that it was too soon to tell the impact on the pound.

The two-year, ten-year part of the Treasury yield curve inverted on Tuesday for the first time in three weeks. An inversion in this part of the curve is seen as a reliable indicator that a recession will follow in one to two years..

(Reporting by Elizabeth Howcroft in London and Pete Schroeder in Washington; additional reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Kim Coghill and Toby Chopra)