Global stock markets surged yesterday, cheering a spectacularly strong US jobs report as a welcome sign of healthy growth in the world’s top economy.
American employers added a total of 287,000 workers to their combined payrolls in June, the Labour Department reported, a full 112,000 more than analysts had expected, and eliminating any concerns about a slowdown.
“That economic pause you were worried about? It never happened,” tweeted University of Michigan economist Justin Wolfers.
European stocks rapidly extended earlier modest gains, pushing Frankfurt and Paris exchanges around 2% higher in an immediate reaction, and lifting London out of negative territory.
Wall Street also welcomed the data, with the key Dow Jones index posting a 0.7% gain at the opening, then rising further.
Analysts said economic strength would normally prompt expectations of a hike in interest rates at one of the next meetings of the Federal Reserve Open Market Committee (FOMC).
But Brexit-related uncertainties continue to weigh, and so no rate move is expected before September at the earliest, giving stock markets unbridled joy for now.
“Various FOMC members have already signalled that they want to wait and see how Brexit will affect the US economy and financial conditions,” said Harm Bandholz at UniCredit.
“But we stick to our view that from an economic perspective rates in the US should be higher, and continue to expect one rate hike at the end of the year, once the Brexit uncertainty has (hopefully) settled,” he said.
Weak German data added to expectations that European Central Bank will be also be offering further monetary support to the economy.
This view was reinforced yesterday as the European powerhouse’s trade surplus shrank because of falling exports, pointing to weakness in the economy.
An IMF downward revision for eurozone growth after Brexit also strengthened the case for further central bank help.
In Milan, banking shares rose sharply after Banco Popolare reported that internal stress tests had confirmed its capacity to resist external shocks.
Banco Popolare was up 18%, with other Italian bank stocks rising by close to, or even above, 10%.
Earlier, Asian markets fell at the end of a volatile week dominated by the fallout from Britain’s EU exit vote and ahead of the employment figures.
The declines came after a week of losses in stocks around the world, after the head of the Bank of England said the risks of leaving the EU were “crystalising” and British property investment funds suspended client withdrawals to prevent a run.
On currency markets, the lingering fear of riskier assets weighed down the dollar against the safe-haven yen, while the greenback climbed against emerging market and higher-yielding units.
The dollar’s strength is also being sapped by the prevailing view that the Federal Reserve will not rush into rate hikes.
This allowed the British pound to edge up to $1.2954, still below the $1.30 mark but stronger than the 31-year low of $1.2798 touched Wednesday.
In London, the FTSE 100 up 0.5% at 6,564.98 points; Frankfurt — DAX 30 up 1.9% at 9,598.55 points and Paris — CAC 40 up 1.5% at 4,177.69 points at the close yesterday.