Aug 8 (Reuters) – Global stock markets were largely flat on Monday, failing to recover much from last week’s sell-off triggered by a strong U.S. jobs report that bolstered the case for sharp interest rate hikes. The dollar weakened and government bond yields fell.
On Wall Street, the Dow Jones Industrial Average (.DJI) 0.08% to 32,831.23; S&P 500 (.SPX) 4,143.27, losing 0.05%; and the Nasdaq Composite (.IXIC) up just 0.04% to 12,662.28. read more
Broad Euro STOXX 600 (.STOXX) It rose about 0.75% on Monday, led by cyclicals and growth stocks, helping to recover losses from Friday. MSCI world equity index (.MIWD00000PUS)Tracking stocks in 47 countries, it added a total of 0.22%. read more
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Higher rates remained the focus of investors.
“Rising inflation and the Fed’s response to it have been a real headwind for valuations this year,” Morgan Stanley strategists said in a note on Monday. “That said, it’s also been a tailwind for earnings. Now we’re on the other side of that mountain, and operating leverage is probably rolling more than consensus expected.”
Indeed, business investment appears to be an early casualty of runaway US inflation and rising interest rates, according to new US government data. read more
Strong U.S. jobs data raised risks for July’s U.S. consumer price report, which could lead to further acceleration in inflation.
“We see inflation remaining above the Fed’s 2% target over the next year,” strategists at BlackRock Investment Institute said in a note on Monday. “We think the Fed will continue to respond to deflationary calls until it figures out how to stop inflation from rising.”
U.S. Treasury yields edged lower as investors continued to digest the jobs report and how the Fed would react. Fed funds futures traders are now pricing in a 67.5% chance of another 75 basis point rate hike in September, raising the Fed funds rate by March to 3.65% from 2.33%.
Benchmark 10-year note yields fell to 2.764% on Monday, the highest since July 22, after hitting 2.869% on Friday. 16.
DOLLAR EXCEPTION?
The U.S. dollar fell about 0.5% to 106.19 against a basket of six major currencies, giving up some gains after a boost in the jobs boom and a jump in yields.
Currency analysts were bullish on the outlook for the US currency.
“Data like this will reinforce any thoughts of ‘US exceptionalism’ and is very positive for the US dollar against all currencies,” said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank, referring to US jobs statistics.
The euro pared modest gains to settle at $1.02.
Bitcoin and other cryptocurrencies, which act as a barometer for risk appetite, have gained. Bitcoin last traded up 3.3% at $23,952.
Gold rose on Monday as the dollar and Treasury yields fell. Spot gold rose 0.8% to $1,787 an ounce after falling 1% in the previous session. US gold futures rose 0.66% to $1,784.
Oil prices rose on Monday, nearing their lowest levels in months in choppy trade, as positive economic data from China and the United States boosted hopes of rising demand despite fears of a recession. read more
US crude oil increased by 1% to $89.91/barrel, and Brent rose by about 1% to $95.91/barrel.
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Reporting by Lawrence Delevingne in Boston, Tom Wilson in London and Wayne Cole in Sydney; Edited by Andrew Heavens, Bernadette Baum, and Jane Merriman
Our standards: Thomson Reuters Trust Principles.
