The stocks around the world experienced notable gains on Monday. The indications of a cooling US jobs market raised expectations for a moderation in interest rate hikes.
Overall Momentum on the Global Market
European stocks performed strongly:
- Germany’s DAX surged 0.7% to 15,949.69.
- Paris CAC 40 picked up 0.8% to 7,354.96.
- London FTSE 100 climbed 0.8% to 7,522.38.
Cyclical stocks for the Dow Jones Industrial Average and S&P 500 showed a 0.2% increase, but with US markets closed for the Labor Day holiday, investors looked to global trends.
Optimistic Outlook
Analysts are eyeing a potentially favourable scenario for the markets. Tan Boon Heng of Mizuho Bank expressed the idea of a “Nirvana” outcome for Fed tightening. It showed that “immaculate dis-inflation” doesn’t harm employment prospects.
China’s financial regulators further supported the property sector by reducing down-payment demand for first and second-time homebuyers. Besides lowering rates on existing mortgages, signalling stimulus efforts that bolstered investor confidence also took place.
Global Picture Targeting Asian Defensive Stocks
Asian markets joined the rally:
- Hong Kong’s Hang Seng index surged 2.5% to 18,844.16.
- Shanghai Composite index adding 1.4% to 3,177.06.
- Tokyo’s Nikkei 225 also rose by 0.7% to 32,939.18, reflecting growing investor sentiment.
Further afield, Seoul’s Kospi saw a 0.8% rise to 2,584.55, and Sydney’s S&P/ASX 200 gained 0.6% to reach 7,318.80. Markets in Taiwan and Southeast Asia also reported positive gains.
US Job Data and The Stocks
Last week on Wall Street:
- The S&P 500 closed at 4,515.77, up 0.2%.
- The Dow Jones Industrial Average saw a 0.3% gain, reaching 34,837.71.
- The Nasdaq Composite was the outlier, closing just below 0.1% lower at 14,031.81, ending its five-day winning streak.
The Labor Department’s report showed employers added a robust 187,000 jobs in August. This marked an improvement from July’s revised 157,000 gain but indicated a slowdown in hiring compared to earlier in the year. Over the June to August period, the economy added 449,000 jobs, the lowest three-month total in three years.
The report also revealed that the unemployment rate increased from 3.5% to 3.8%, the highest level since February 2022, although still historically low.
Market Sentiment: Rate Hike Concerns Easing
Strong hiring and consumer spending have so far prevented the expected recession in 2023. However, these factors have complicated the Federal Reserve’s task of curbing inflation by driving up wages and prices.
August saw market concerns that the Fed might need to maintain higher interest rates for an extended period. Recent economic indicators have contributed to the growing sentiment on Wall Street that the Fed may keep rates unchanged at its upcoming September policy meeting.
Fed’s Target – Best Long-Term Stocks in the Sector
The US central bank has been aggressively raising its main interest rate since 2022 to levels not seen since 2001, with the aim of reining in inflation. The Fed maintains that its next moves will depend on the latest economic data.
Within the S&P 500, financial and bank trending stocks posted substantial gains, with Charles Schwab rising 2.3% and US Bancorp adding 1.5%. Higher oil prices also lifted energy stocks, as benchmark US crude prices surged by 2.3%, resulting in gains of 2.1% for Exxon Mobil and 2% for Chevron.
Current Oil Prices and Exchange
Early on Monday, US benchmark crude prices dipped by 11 cents to $85.44 a barrel. At the same time, Brent crude oil lost 6 cents, settling at $88.49 a barrel.
In currency trading, the USD strengthened to 146.36 Japanese yen from 146.22 yen late on Friday, while the euro improved to $1.0793 from $1.0779.
The recent rally of the stocks reflects cautious optimism stemming from the US jobs market’s indications of cooling, fostering hopes of a moderation in interest rate hikes and providing a positive start to the week for investors worldwide.
