NEW YORK — Global markets experienced a mixed reaction on Monday following a US jobs report that exceeded expectations and added to investor uncertainty. The report, released on Friday, revealed stronger-than-anticipated job growth, leading to concerns about the Federal Reserve’s next moves regarding interest rates.
In Asia, the Nikkei 225 index in Tokyo bucked the trend, rising by 0.9% to close at 39,038.16. This uptick followed revised government data showing Japan’s economy contracted at an annualized pace of 1.8% for January-March, an improvement from the previously reported 2% decline. Despite this positive revision, other Asian markets were less buoyant. South Korea’s Kospi fell 0.8% to 2,701.17, while markets in China, Hong Kong, Australia, and Taiwan were closed for public holidays.
The global sell-off was more pronounced in Europe. The CAC 40 in Paris dropped 1.7% to 7,866.87, and Germany’s DAX fell 0.7% to 18,425.26. Britain’s FTSE 100 also experienced a decline, down 0.4% to 8,215.84 in early trading. These declines were exacerbated by political developments in France, where President Emmanuel Macron dissolved the National Assembly following a setback in parliamentary elections. The far-right parties’ significant gains prompted Macron to call for a snap election, leading to a drop in the euro to its lowest point in nearly a month. The euro traded at $1.0766, down from $1.0778.
In the US, the impact of the jobs report was evident. The S&P 500 futures slipped 0.1%, and futures for the Dow Jones Industrial Average were down 0.2%. On Friday, the S&P 500 had already fallen by 0.1%, with the Nasdaq Composite decreasing by 0.2% and the Dow Jones dropping 0.2%. The robust employment figures, showing an addition of 272,000 jobs in May, exceeded economists’ forecasts and indicated continued strength in the job market. However, the rising unemployment rate, now at 4.3%, added some complexity to the Federal Reserve’s decision-making process regarding interest rates.
Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, commented on the situation: “We are back to the starting point where the Fed could hardly justify a rate cut when jobs data remains strong and inflation is not easing as fast as it should.” The strong jobs market has been a double-edged sword, supporting consumer spending but complicating the Fed’s path forward.
In reaction to the jobs report, the yield on the 10-year Treasury note jumped to 4.43% from 4.29%, and the two-year yield, which is more sensitive to Fed expectations, increased to 4.89% from 4.74%. The data has led to speculation that the Federal Reserve may keep interest rates steady or even consider further hikes, putting a damper on rate-cut expectations for the upcoming July meeting.
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Additionally, recent economic data suggested that the economy could be cooling. Reports from the previous week showed manufacturing contraction in May, weaker-than-expected worker productivity, and a decline in job openings. These indicators hint at underlying economic challenges despite the strong job growth.
Investors are also keeping an eye on retail earnings, which have revealed a shift in consumer spending. With inflation remaining stubborn, consumers, particularly those with lower incomes, are cutting back on non-essential purchases. Notably, GameStop, a video game retailer at the heart of the meme stock frenzy, saw its shares plummet 39.4% after reporting another quarterly loss and announcing plans to issue up to 75 million additional shares.
In commodities, US benchmark crude oil prices fell by 18 cents to $75.35 per barrel in electronic trading on the New York Mercantile Exchange, while Brent crude, the international standard, decreased by 11 cents to $79.51 per barrel.
As the global financial landscape adjusts to these developments, market participants will closely monitor upcoming economic data and central bank decisions to navigate the evolving economic conditions.
