The latest jobs report showed the US economy is so far proving resilient in the face of higher interest rates
Stock markets and oil prices rallied Friday on hopes China would roll back some of its economically-painful policies surrounding Covid.
Equities also got a boost from the latest US jobs data, which raised hopes of a soft landing of the economy despite rising interest rates.
“Asia markets bounced back strongly today on more unsubstantiated reports that the Chinese government is looking at a reopening strategy as it looks to navigate a path out of the straitjacket of its current zero-Covid policy,” said CMC Makets analyst Michael Hewson.
“These reports, which still haven’t been confirmed in any official capacity, have prompted a huge relief rally in equity markets, despite concerns that any reopening is unlikely to happen in the immediate future, and the very real risk that it is merely a sucker’s rally,” he added.
The rally continued into Europe, where London, Paris and Frankfurt all rose at least two percent.
Wall Street stocks also shot higher at the opening bell, but much of the gains had evaporated by midday.
The optimism also lifted oil prices by more than four percent at one point as traders eyed rising demand for crude on the news out of China.
In foreign exchange, the dollar slid more than one percent against the euro despite the prospect of higher US interest rates.
The pound also won back some ground against the dollar, rising 1.2 percent a day after tumbling as the Bank of England said the UK economy could face a two-year-long recession that it believes has already begun.
The BoE on Thursday also lifted its main interest rate by 0.75 percentage points, the most in 33 years in efforts to contain runaway inflation.
The week also saw the Federal Reserve hike its key rate by the same amount, as central banks try to cool decades-high inflation.
The Fed has pointed to a still-strong labour market as a key reason for not shifting from aggressive rate-tightening.
The addition of 261,000 jobs last month, far more than economists had forecast, will likely reinforce the determination of policymakers to continue the hawkish policy.
That would normally see equities tumble as higher interest rates are bad for most businesses.
But the figures are “consistent with achieving a soft landing for the economy”, said market analyst Patrick O’Hare at Briefing.com.
Fed Chair Jerome Powell has indicated the central bank is willing to push the US economy into recession if necessary to tame inflation.
But Chris Beauchamp, chief market analyst at online trading platform IG, pointed to one indicator in the report that suggests a drop of 300,000 jobs was the reason why the unemployment rate inched higher.
“This might be a case of cherry-picking par excellence, but markets have taken it as the first sign that the hitherto-unstoppable US market is weakening, thus perhaps bringing forward the chances of that fabled Fed pivot we keep hearing so much about,” said Beauchamp.
Markets have been looking for any data that would help the Fed “pivot” away from its aggressive rate hikes.
– Key figures around 1530 GMT –
New York – Dow: UP 0.3 percent at 32,085.46 points
EURO STOXX 50: UP 2.7 percent at 3,688.33
London – FTSE 100: UP 2.0 percent at 7,334.84 (close)
Frankfurt – DAX: UP 2.5 percent at 13,459.85 (close)
Paris – CAC 40: UP 2.8 percent at 6,416.44 (close)
Tokyo – Nikkei 225: DOWN 1.7 percent at 27,199.74 (close)
Hong Kong – Hang Seng Index: UP 5.4 percent at 16,161.14 (close)
Shanghai – Composite: UP 2.4 percent at 3,070.80 (close)
Pound/dollar: UP at $1.1303 from $1.1160 Thursday
Euro/dollar: UP at $0.9911 from $0.9751
Dollar/yen: DOWN at 147.15 yen from 148.25 yen
Euro/pound: UNCHANGED at 87.73 pence
Brent North Sea crude: UP 3.0 percent at $97.50 per barrel
West Texas Intermediate: UP 3.7 percent at $91.41 per barrel
burs-rl/bp
