Stock markets breathe a sigh of relief as US jobs numbers ease fears of more aggressive rate hikes in the world’s largest economy
- Official figures showed that the US economy added 315,000 jobs last month
- Unemployment rose to 3.7% from 3.5% and wage growth slowed
Equity markets breathed a sigh of relief yesterday as US jobs numbers allayed fears of more aggressive rate hikes in the world’s largest economy.
The FTSE100 climbed 1.86 percent or 132.69 points to 7281.19, while the Paris, Frankfurt and Milan stock exchanges also rose sharply.
That was after official figures showed the US economy added 315,000 jobs last month – more than expected but down from July’s 526,000.
It was the 20th consecutive month of job growth, but was outpaced by the 700,000 people who entered the labor market – either working or looking for work – overall.
Relief: The FTSE100 climbed 1.86 percent or 132.69 points to 7281.19, while the Paris, Frankfurt and Milan bourses also rose sharply
Unemployment rose from 3.5 percent to 3.7 percent. At the same time, wage growth slowed. Any sign of a slowdown in strengthening jobs could stall the US Federal Reserve as it plots the path for interest rates.
The Fed has been aggressively raising rates to fight inflation, but the latest numbers may make it less likely that it will target a third straight 0.75 percentage point hike this month.
Eric Merlis, co-head of global markets at Citizens, a bank, said: “This gradual cooling of the overheated labor market may be just what the US economy needs to ease inflationary pressures.”
Markets have been gripped by concerns about rate hikes since Fed Chair Jerome Powell said last week that monetary policy would be tight “for some time”. Yesterday’s rebound followed a dismal session the previous day when the FTSE100 fell 1.9 percent. Giles Coghlan, chief currency analyst at HYCM, said: “The market is laser focused on how aggressive the Fed is going to be with its rate hike cycle.”
The pound, which had come off a bleak couple of days when it hit new two-and-a-half-year lows, rose to $1.1588 against the dollar but later settled closer to $1.15.
The US currency has overrun its rivals in recent months thanks to the Fed’s aggressive interest rate policy.
Sterling’s weakness was compounded by a drop in demand for UK government bonds last month – adding billions of pounds to borrowing costs.
Mike Riddell, Senior Fixed Income Portfolio Manager at Allianz Global Investors, said this “could be a sign that foreign investors are losing confidence in UK assets and the credibility of politics”.
