The stock markets exhibited contrasting trends, as US stocks surged higher due to positive earnings, while a mixed jobs report suggested a possible delay in further interest rate hikes by the Federal Reserve.
Last month, the United States added 187,000 jobs, falling short of the 200,000 analysts’ expectation but remaining relatively stable compared to revised June figures. July’s data from the Labor Department revealed a 0.4 percent increase in average hourly earnings, consistent with the previous month.
These figures add to the positive signals that the Federal Reserve’s aggressive interest rate hikes are effectively curbing inflation without risking a significant economic downturn. This scenario may prompt the Fed to consider keeping interest rates unchanged during the upcoming policy meeting in September.
However, the jobless rate dipped slightly to 3.5 percent, just below June’s figure of 3.6 percent, indicating a historically low level of unemployment.
Briefing.com analyst Patrick O’Hare noted, “The key takeaway from the report is that labor supply continues to be tight, which could make it difficult to achieve a more Fed-pleasing moderation in wage growth.” This observation may not lead to an immediate increase in the target range for the fed funds rate, but it does support the notion that the Fed will likely maintain higher policy rates for a longer period.
In response to the US jobs data, Wall Street’s major indices opened on a positive note, with the Dow rising by 0.4 percent, the broader S&P 500 gaining 0.4 percent, and the tech-heavy Nasdaq climbing 0.7 percent.
Following the announcement of the US jobs numbers, the dollar weakened against its major rivals, suggesting that currency traders anticipate a potential pause in interest rate hikes by the Fed.
Earlier in the week, Fitch’s decision to strip the United States of its top credit rating had led to a slide in equities. Investors sought refuge in safe-haven assets like the dollar, yen, and government bonds. However, positive earnings reports helped offset debt concerns in the US economy.
In particular, Amazon’s second-quarter results surpassed market expectations, which contributed to an improved investor sentiment.
On the corporate front, Apple reported earnings that exceeded market expectations. On the other hand, shares in British advertising group WPP tumbled seven percent on Friday due to a profit warning. The warning was triggered by reduced spending from US tech clients as they cut costs.
Meanwhile, Europe’s main equity markets traded mixed in afternoon deals, with Frankfurt and London experiencing slight declines.
Lastly, oil prices rose on Friday as Saudi Arabia extended a production cut for an additional month.
*- Key figures around 1330 GMT -*
New York – Dow: UP 0.4 percent at 35,347.83 points
London – FTSE 100: DOWN 0.1 percent at 7,518.81
Frankfurt – DAX: DOWN 0.2 percent at 15,868.62
Paris – CAC 40: UP 0.3 percent at 7,282.09
EURO STOXX 50: UP 0.2 percent at 4,312.24
Tokyo – Nikkei 225: UP 0.1 percent at 32,192.75 (close)
Hong Kong – Hang Seng Index: UP 0.6 percent at 19,539.46 (close)
Shanghai – Composite: UP 0.2 percent at 3,288.08 (close)
Euro/dollar: UP at $1.1019 from $1.0952 on Thursday
Pound/dollar: UP at $1.2769 from $1.2710
Euro/pound: UP at 86.29 from 86.14 pence
Dollar/yen: DOWN at 141.93 yen from 142.52 yen
Brent North Sea crude: UP 0.3 percent at $85.42 per barrel
West Texas Intermediate: UP 0.4 percent at $81.86 per barrel