Global stocks and dollar steady after US jobs report

London — Global stocks and the dollar steadied on Monday after unexpectedly strong US jobs data soothed concerns about the global economy, though diplomatic tensions remained a worry as the White House warned Russia could invade Ukraine at any time.

The January payrolls report on Friday shows annual growth in average hourly earnings climbed to 5.7%, from 4.9%, while payrolls for previous months were revised up by 709,000 to radically change the trend in hiring.

The data added to the risk of aggressive rate rises by the Federal Reserve, however, and markets are also pricing in tightening in Britain and the eurozone.

“The most dominant thing is still central banks and the tightening we see there, that has led to the volatility,” said Matthias Scheiber, global head of portfolio management at Allspring Global Investments. “The labour data looked good; that basically saved the market.”

After a bumpy ride last week, the MSCI world equities index was flat. European stocks and the UK’s FTSE were also steady.

S&P 500 futures and Nasdaq futures both slipped 0.3%, after last week’s market turmoil in growth-sensitive tech stocks saw Amazon gain almost $200bn while Facebook-owner Meta Platforms lost just as much.

The US dollar index edged up 0.05% to 95.491, after shedding 1.8% last week, but was down 0.13% to 115.08 yen.

The euro was down 0.05% at $1.1441, having shot up 2.7% last week, its best performance since early 2020 as markets brought forward the likely timing of a first euro one rate rise.

ECB policymaker Martins Kazaks pushed back against market expectations for a rate hike as soon as July in an interview with Reuters. He said the bank could end its stimulus programme earlier than planned, but it was unlikely to raise its main interest rate so quickly.

Klaas Knot, the Dutch Central Bank President and a member of the ECB’s governing council, said on Sunday he expects a hike in the fourth quarter of this year.

ECB President Christine Lagarde is scheduled to testify before the EU parliament later on Monday.

The Russian rouble recovered to a three-week high against the dollar as French President Emmanuel Macron travelled to Moscow, seeking commitments from President Vladimir Putin to dial down tensions with Ukraine, where Western leaders fear the Kremlin plans an invasion.

Inflation concerns, meanwhile, sent two-year US Treasury yields to an almost two-year high of 1.331% in Asia.

Ten-year Treasury yields dipped after hitting two-year highs on Friday and German 10-year government bonds hovered at Friday’s three-year highs.

“The [US jobs] report not only indicated that payrolls were way more than anyone could have imagined, but there was exceptional strength in earnings which has to add growing concern among Fed officials about upward pressure on inflation,” said Kevin Cummins, chief US economist at NatWest Markets.

Consumer price figures for January are due on Thursday and could show core inflation accelerating to the fastest pace since 1982 at 5.9%.

As a result, markets moved to price in a one-in-three chance the Fed might hike by a full 50 basis points in March and the prospect of rates reaching 1.5% by year end.

Oil prices see-sawed as some investors took profits after signs of progress in US-Iran nuclear talks while others remained bullish, bolstered by rising consumption amid ongoing supply constraints.

Brent reached its highest since October 2014 before dropping 50c to $92.75 a barrel, while US crude fell $1 to $91.30.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.13%, while Tokyo’s Nikkei fell 0.7% and South Korea 0.19%.

China returned from the Lunar New Year break with jumps in equities and commodities. The blue-chip CSI300 and Shanghai Composite rose 1.54% and 2%, respectively, and metals and iron ore rallied in Shanghai.

Hong Kong’s Hang Seng, which returned from the break on Friday, was little changed.

Gold rose 0.27% to $1,813 an ounce, buoyed by inflation worries.

Reuters