Stocks, dollar rally as U.S. jobs data shows massive rebound

By Katanga Johnson and Lawrence White

WASHINGTON/LONDON (Reuters) – U.S. and European shares resumed their rally and the dollar index hit a one-year peak on Friday as U.S. jobs data surprised on the upside.

Nonfarm payrolls increased by 531,000 jobs last month as the surge in COVID-19 infections over the summer subsided, offering more evidence that U.S economic activity was regaining momentum early in the fourth quarter.

The dollar index, which measures the greenback against a basket of six rivals, rose as high as 94.634 after the jobs report, its highest level since Sept. 25, 2020.

The greenback, which has strengthened around 1% in the past fortnight, was last up 0.22% at 94.534.

“If these numbers continue at this pace, we could probably see full employment at the end of the first quarter,” Peter Cardillo, chief market economist at Spartan Securities, said.

The Dow Jones Industrial Average rose 0.75 while the S&P 500 gained 0.71%. The Nasdaq Composite added 0.58%. The pan-European STOXX 600 index rose 0.33%.

MSCI’s gauge of stocks across the globe gained 0.43%, keeping pace to continue a four-day streak of record closing highs in a week in which central banks around the world refrained from hawkish surprises.

Friday’s advances came even after the U.S. Federal Reserve finally announced on Wednesday that it would begin tapering its massive asset purchase programme, though Fed Chair Jerome Powell said he was in no rush to hike borrowing costs.

“Even though it transpired as expected, it is a significant milestone. The direction of travel is now clearly towards policy normalisation, though the Fed emphasised that tapering is not tightening,” said Stefan Hofer, chief investment strategist for LGT in Asia Pacific.

“It was really expert communication and very well handled.”

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.24% lower, while Japan’s Nikkei lost 0.61%.

Hong Kong had weighed on the regional index, falling 1.25% as index heavyweight and rate-sensitive HSBC fell 3.6% following a dovish call from the Bank of England (BoE) and anxiety over property stocks.

Trading in shares of Chinese developer Kaisa Group Holdings Ltd was suspended a day after the company said a subsidiary had missed a payment on a wealth management product, the latest sign of a deepening liquidity crisis in the Chinese property sector.

An index tracking Hong Kong-listed mainland Chinese developers slipped 2.8%, and an onshore China property index lost 2%.

More broadly, Shanghai shares lost 1% and Chinese blue chips slipped 0.5%.

“MISLEADING SIGNALS”

While investors were happy with the Fed’s communications, several felt that they had been misdirected by policymakers at the BoE.

The Bank of England kept interest rates on hold on Thursday, wrong-footing investors who had been convinced that it would be the first of the world’s big central banks to raise borrowing costs after the pandemic.

On Friday, the pound was near a month low having tumbled 1.36% the previous day following the central bank’s decision, which also roiled bonds in Britain and across Europe more broadly.

Germany’s 10-year bond yield looked set for its biggest weekly drop since June last year, down 15 basis points as central banks left policy rates unchanged.

Oil prices rose, staging a partial recovery after OPEC+ producers rebuffed a U.S. call to raise supply and instead maintained plans for a gradual return of output halted by the coronavirus pandemic.

U.S. crude recently rose 1% to $79.60 per barrel and Brent was at $81.13, up 0.73% on the day, above month lows hit a day earlier following a report that Saudi Arabia’s output would soon surpass 10 million barrels per day for the first time during the COVID-19 pandemic.[O/R]

Spot gold added 0.4% to $1,797.90 an ounce.

(Editing by Shri Navaratnam, Sam Holmes and Andrew Heavens)

By Katanga Johnson and Lawrence White

WASHINGTON/LONDON (Reuters) – U.S. and European shares resumed their rally and the dollar index hit a one-year peak on Friday as U.S. jobs data surprised on the upside.

Nonfarm payrolls increased by 531,000 jobs last month as the surge in COVID-19 infections over the summer subsided, offering more evidence that U.S economic activity was regaining momentum early in the fourth quarter.

The dollar index, which measures the greenback against a basket of six rivals, rose as high as 94.634 after the jobs report, its highest level since Sept. 25, 2020.

The greenback, which has strengthened around 1% in the past fortnight, was last up 0.22% at 94.534.

“If these numbers continue at this pace, we could probably see full employment at the end of the first quarter,” Peter Cardillo, chief market economist at Spartan Securities, said.

The Dow Jones Industrial Average rose 0.75 while the S&P 500 gained 0.71%. The Nasdaq Composite added 0.58%. The pan-European STOXX 600 index rose 0.33%.

MSCI’s gauge of stocks across the globe gained 0.43%, keeping pace to continue a four-day streak of record closing highs in a week in which central banks around the world refrained from hawkish surprises.

Friday’s advances came even after the U.S. Federal Reserve finally announced on Wednesday that it would begin tapering its massive asset purchase programme, though Fed Chair Jerome Powell said he was in no rush to hike borrowing costs.

“Even though it transpired as expected, it is a significant milestone. The direction of travel is now clearly towards policy normalisation, though the Fed emphasised that tapering is not tightening,” said Stefan Hofer, chief investment strategist for LGT in Asia Pacific.

“It was really expert communication and very well handled.”

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.24% lower, while Japan’s Nikkei lost 0.61%.

Hong Kong had weighed on the regional index, falling 1.25% as index heavyweight and rate-sensitive HSBC fell 3.6% following a dovish call from the Bank of England (BoE) and anxiety over property stocks.

Trading in shares of Chinese developer Kaisa Group Holdings Ltd was suspended a day after the company said a subsidiary had missed a payment on a wealth management product, the latest sign of a deepening liquidity crisis in the Chinese property sector.

An index tracking Hong Kong-listed mainland Chinese developers slipped 2.8%, and an onshore China property index lost 2%.

More broadly, Shanghai shares lost 1% and Chinese blue chips slipped 0.5%.

“MISLEADING SIGNALS”

While investors were happy with the Fed’s communications, several felt that they had been misdirected by policymakers at the BoE.

The Bank of England kept interest rates on hold on Thursday, wrong-footing investors who had been convinced that it would be the first of the world’s big central banks to raise borrowing costs after the pandemic.

On Friday, the pound was near a month low having tumbled 1.36% the previous day following the central bank’s decision, which also roiled bonds in Britain and across Europe more broadly.

Germany’s 10-year bond yield looked set for its biggest weekly drop since June last year, down 15 basis points as central banks left policy rates unchanged.

Oil prices rose, staging a partial recovery after OPEC+ producers rebuffed a U.S. call to raise supply and instead maintained plans for a gradual return of output halted by the coronavirus pandemic.

U.S. crude recently rose 1% to $79.60 per barrel and Brent was at $81.13, up 0.73% on the day, above month lows hit a day earlier following a report that Saudi Arabia’s output would soon surpass 10 million barrels per day for the first time during the COVID-19 pandemic.[O/R]

Spot gold added 0.4% to $1,797.90 an ounce.

(Editing by Shri Navaratnam, Sam Holmes and Andrew Heavens)