Global stocks up after U.S. job gain paves way for rate hike

BEIJING

Monday’s strong U.S. job data paved the way for interest rate increases and Chinese exports rose in double digits. Global stocks rose Monday.

London, Shanghai, Tokyo, and Frankfurt all advanced. Hong Kong dropped. Oil prices rose.

Wall Street’s benchmark S&P 500 lost 0.2% on Friday after government data showed American employers added more jobs than expected in June. The Fed might postpone or scale back its plans for further rate increases to cool inflation if this data is below expectations.

“Now it appears they will be debating if they need to be more aggressive,” Edward Moya, Oanda said A report.

Early trading saw the FTSE 100 in London rise 0.4% to 7,471.08 while the DAX in Frankfurt rose 0.4% (0,429.44). The CAC 40 Paris increased 0.6% to 6,512.74

On Wall Street, the future for the S&P 500 rose 0.3% while that for the Dow Jones Industrial Average was up 0.2%.

The S&P declined 0.2% on Friday after government data showed employers hired more Americans in July than forecast. The Dow gained 0.2%, while the Nasdaq composite lost 0.5%.

The Shanghai Composite Index rose 0.3%, to 3,236.93 in Asia after China’s July exports increased 18% compared to a year ago, exceeding forecasts.

China’s trade surplus rose to US$101 Billion in July, after imports increased just 2.3% compared to a year earlier. This is a reflection of weak domestic demand.

The Hang Seng in Hong Kong dropped 0.8% to 20,050.15, while the Nikkei225 in Tokyo rose 0.2% to 26,241.13.

The Kospi in Seoul gained less than 0.1% to 2,493.10 and Sydney’s S&P-ASX 200 shed less than 0.1% to 7,020.60.

India’s Sensex gained 0.9% to 58,892.25. While Jakarta gained, Taiwan, New Zealand and Singapore retreated.

Investors fear that global economic growth could be hampered by tighter Fed policy and the central banks of Europe and Asia.

Markets have also been affected by Russia’s war against Ukraine. This caused a spike of prices for oil, wheat, and other commodities. There has also been uncertainty about Chinese antivirus curbs which have disrupted manufacturing.

Fed officials believe that the economy can bear higher borrowing costs to reduce inflation. This is based on last week’s solid U.S. employment data. Trader expectations that the Fed will raise its benchmark interest rate by 0.75 percentage point next month after Friday’s announcement. This is a significant increase from the forecast of half a percent. It would be triple the usual margin, and the third outsized increase this year.

While higher interest rates are intended to combat inflation by cooling business activity and job losses, it also increases the risk of recession. This latest inflationary spike is not typical because forecasters blame shortages of goods for the coronavirus pandemic and not rapid economic growth.

Wall Street has had its best month since late 2020. This is due to falling bond yields. Traders expected the economy to slow enough that the Fed would relax.

Energy markets saw benchmark crude oil fall 56 cents to $88.45 a barrel in electronic trading at the New York Mercantile Exchange. Friday’s contract increased 47 cents, to $89.01. Brent crude oil, which is the price basis for international trade, fell 61 cents per barrel to $94.31 in London. It was up 80 cents at $94.92 during the previous session.

From Friday’s 135.11yen, the dollar rose to 135.18yen. From $1.0178, the euro rose to $1.0187.