Stocks, dollar rally on sunny U.S. jobs data

By Lawrence White

LONDON (Reuters) – U.S. and European shares resumed their rally on Friday as U.S. jobs data surprised on the upside, with the dollar index also hitting a one-year peak on the better than expected October employment data.

U.S. stock index futures extended earlier gains in the day with S&P 500 e-minis up 0.44%, as the Labor Department reported nonfarm payrolls increased by 531,000 jobs last month.

Economists polled by Reuters had forecast payrolls rising by 450,000 jobs

The U.S. dollar continued gains over major peers including sterling, which took a beating after the Bank of England (BoE) confounded markets by passing up a chance to raise interest rates on Thursday.

MSCI’s gauge of stocks across the world however fell 0.08%, indicating a possible end to its four-day streak of record closing highs in a week in which central banks around the world refrained from hawkish surprises.

The global index was weighed down by Asian shares that fell earlier in the day, with Asia-Pacific shares outside Japan dipping 0.27%, while Japan’s Nikkei fell 0.7% from a month high reached the day before, as manufacturers’ earnings disappointed. [.T]

The gains came even after the U.S. Federal Reserve on Wednesday finally announced 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, Hong Kong had weighed on the regional index, falling 1.25% as index heavyweight and rate-sensitive HSBC fell 3.6% following the BoE’s dovish call 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.

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.

The dollar index last stood at 94.529, within sight of October’s 12-month highs, after the U.S. currency also gained ground on the euro. [FRX/]

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 gained 1.04% to $79.66 a barrel, while Brent crude rose 0.8% to $81.18 per barrel, 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 edged down 0.1%.

(Editing by Shri Navaratnam and Sam Holmes)

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