Money News

Strong U.S. jobs report powers stocks to weekly gain

NEW YORK (Reuters) - Wall Street stocks rose on Friday, recovering all the losses sustained after Britain’s surprise vote last month to leave the European Union, and equities around the globe also jumped after data showed U.S. job growth in June accelerated more rapidly than even the most optimistic forecasts.

Friday’s gains, which saw the S&P 500 index finish a hair below its record closing high, were enough for U.S. equities and MSCI’s gauge of markets around the world to end the week in the green.

The U.S. economy added 287,000 jobs last month, according to the Labor Department, smashing the consensus forecast of 175,000. It was the highest total in eight months and wiped out expectations that the Federal Reserve might cut U.S. interest rates in the coming months.

The Dow Jones industrial average rose 250.86 points, or 1.4 percent, to 18,146.74, the S&P 500 gained 32 points, or 1.53 percent, to 2,129.9 and the Nasdaq Composite added 79.95 points, or 1.64 percent, to 4,956.76.

“What this report does is it assuages fears about the economy losing momentum,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. “That’s been weighing on the minds of investors.”

European stocks also surged after the data’s release, with Germany’s DAX stock index rising 2.24 percent to lead the region’s bourses. Europe’s FTSEuroFirst 300 index of top shares rose 1.49 percent.

MSCI’s all-country world stock index rose 1.03 percent.

Oil prices initially rose more than 1 percent after the strong jobs data, but oversupply concerns resurfaced with data showing the U.S. oil rig count rose by 10 this week.

Brent crude futures rose 0.5 percent to $46.64 per barrel. U.S. crude futures gained 0.2 percent to $45.24. [O/R]

A man looks at an electronic board showing the Japanese yen's exchange rate against Euro outside a brokerage in Tokyo, Japan, July 6, 2016. REUTERS/Issei Kato

Still, the upbeat U.S. jobs report failed to significantly alter the longer-term expectation that the Federal Reserve will keep U.S. interest rates on hold for at least a year, according to Fed funds futures prices.

That flattened the yield curve, with investors buying U.S. government debt with longer-dated maturities and selling shorter-dated notes.

The 10-year Treasury note rose 8/32 in price to yield 1.361 percent. While two-year notes fell 1/32 in price to yield 0.617 percent.

Yields on 10- and 30-year Treasuries fell to their lowest on record on Tuesday and for the week yields declined 22 and 15 basis points respectively.

Analysts also pointed to international investors’ preference for U.S. government bonds, which hold notably higher yields than government bonds in comparable developed markets like Britain, Japan and Germany.

“There is such a tremendous appetite for (U.S. Treasuries) that any selloffs are bought very quickly and I think that’s what you saw today,” said Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management in Kansas City, Missouri.

Increased buying in Treasuries pushes up prices, which move inversely to their yields.

Low expectations for a Fed rate hike also pushed the U.S. dollar down against the yen. While the dollar rose immediately after the jobs report, climbing to a two-week high, those gains evaporated and the dollar was last down 0.3 percent to 100.45 yen.

Gold rose 0.35 percent as traditionally safe-haven assets all saw gains despite the rally in stocks.

(Changes weekly Treasuries losses in 13th paragraph to basis points from percent.)

Reporting by Dion Rabouin; Additional reporting by Jamie McGeever in London; Editing by David Gregorio and James Dalgleish