Wall Street stocks hit an all-time high on Friday after the US jobs numbers for June came in better than expected, signalling that the world’s largest economy was emerging from the pandemic at a robust pace.
The US labour market added 850,000 positions last month, beating economists’ expectations for 720,000 new jobs and substantially above the 583,000 revised figure for May.
Wall Street’s broad S&P 500 and tech-heavy Nasdaq Composite built on records hit earlier this week, with both benchmarks up 0.6 per cent in afternoon trading in New York.
The employment reading was not, however, too strong to suggest the US Federal Reserve would be tempted to rein in the pandemic-era stimulus that has underpinned asset prices throughout the health crisis.
“The US jobs figures couldn’t have delivered better news for Wall Street,” said Danni Hewson, financial analyst at AJ Bell, which said this was a “Goldilocks” moment for markets — “not too hot, not too cold”.
“Enough new jobs to confirm the economy is on a roll, [but] enough jobless to give the Fed’s current strategy a warm hug,” added Hewson. Jay Powell, Fed chair, has vowed to keep the bank’s monetary policy supportive until the labour market has recovered from the pandemic.
Accompanying the rise in stocks was a modest rally in government bonds. The yield on the benchmark 10-year US Treasury slid 0.04 percentage points to 1.44 per cent. The yield on the equivalent German Bund was down the same amount at minus 0.24 per cent.
The region-wide Stoxx Europe 600 and Frankfurt’s Xetra both closed up 0.3 per cent, while London’s FTSE 100 was flat.
“We think that the European market is really benefiting from euro depreciation,” said Bastien Drut, chief thematic macro strategist at CPR Asset Management, referring to a month-long rally for the dollar against peers. The single currency, which was steady at $1.1841 on Friday, is down more than 3 per cent against the greenback since the beginning of June.
Drut said another tailwind for European equities is the composition of the continent’s bourses, which are weighted towards cyclical stocks that benefit more from the region reopening.
While some decision makers at the US central bank are beginning to talk more openly about the need to prepare for the gradual winding down of pandemic-era stimulus, in the eurozone the European Central Bank has maintained a more dovish stance, reflecting the different paces of recovery on each side of the Atlantic.
“The European Central Bank is always very dovish, and you can see that there is a lot of pressure on the Fed to normalise its policy and taper its asset purchases,” CPR’s Drut said. “The path will continue to diverge in coming quarters.”
Oil prices hovered near their highest level for two and half years after officials at the Opec+ meeting of key crude-producing nations struggled to reach an agreement on production output. Brent crude, the global oil benchmark, and the US marker West Texas Intermediate were steady at around $75 a barrel.