Global stocks started the week on a stronger footing as fresh US jobs data eased fears that the Federal Reserve could raise interest rates as early as September. The weaker labour market figures encouraged investors to increase bets that US borrowing costs could remain unchanged, giving a boost to stocks, particularly technology companies. However, rising oil prices and renewed tensions around the Strait of Hormuz kept some pressure on market sentiment.
Data from the US Bureau of Labor Statistics showed that 23,000 jobs were lost in July, while employment figures for May and June were also revised lower. The figures pointed to signs of a cooling US economy and immediately changed expectations around the Federal Reserve’s next move. According to Bloomberg, the probability of a September rate increase dropped to about 43 per cent from 64 per cent a week earlier, giving investors fresh confidence to return to riskier assets.
Wall Street responded positively, with the S&P 500 reaching a new record high while the Nasdaq gained more than one per cent. Technology stocks led the recovery, with investors showing renewed interest in companies that could benefit from lower borrowing costs. The optimism also spread across Asian markets, as Japan’s Nikkei climbed 2.1 per cent, while Hong Kong, Shanghai, Seoul and other major markets also recorded gains.
Still, investors are not completely convinced that the Federal Reserve will turn dovish. Inflation data due later this week could prove more important in determining the central bank’s next move. Analysts noted that while weaker employment reduces some inflation pressure, consumer prices remain a major concern for policymakers ahead of the September Federal Open Market Committee meeting.
Oil prices provided another source of uncertainty for global markets, rising as concerns over the Strait of Hormuz continued. Crude prices climbed after Iran’s Revolutionary Guards said the strategic waterway would remain closed until a list of demands was met. With the route handling a significant share of global oil and liquefied natural gas shipments, prolonged disruption could put further pressure on energy prices and complicate the inflation outlook. For investors, the week ahead will therefore be a balancing act between signs of a slowing US economy, interest-rate expectations and the growing risks in global energy markets.
source: punch
