World stocks rise after US jobs report

LONDON, Aug 8 (Reuters) – Global stock markets rallied on Monday, recovering from losses triggered by a strong U.S. jobs report last week that bolstered the case for sharp rate hikes, while the dollar weakened and government bond yields fell.

Markets moved quickly on Friday to price in a roughly 70% chance the U.S. Federal Reserve would raise interest rates by 75 basis points in September, sending two-year yields up 20 basis points and inverting the curve further. read more

Still, the broad Euro STOXX 600 (.STOXX) rose 0.8% in early trade on Monday, led by cyclicals and growth stocks, helping to recover losses from Friday driven by the US jobs report. Miners (.SXPP) and technology stocks (.SX8P), hit hard last week, led the gains.

The MSCI world stock index (.MIWD00000PUS), which tracks stocks in 47 countries, added 0.2%, paring losses of the same amount as Friday.

S&P 500 futures and Nasdaq futures rose 0.5% and 0.6%, respectively. The S&P 500 had ended lower on Friday, weighed down by technology stocks.

Higher prices nevertheless remained in focus for investors.

“Sectors like the higher-rated tech stocks will continue to come under pressure for a while until we can see the Fed rate come down,” said Robert Alster, chief investment officer at Close Brothers Asset Management.

The jobs data raised the stakes for the July US consumer price report due on Wednesday, which could see a slight slowdown in headline growth but likely a further acceleration in core inflation.

“Our economists expect headline (annual) rates to finally fall after energy prices have fallen recently,” Deutsche Bank analysts wrote.

The risk of a recession had previously haunted equity markets, with MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) falling 0.5%.

After rising on Friday after solid US non-farm payrolls data, most eurozone bond yields were lower. Germany’s 10-year Bund yield fell slightly to 0.89%.

Italian bonds underperformed, with 10-year yields around 2 bps higher on the day at 3.04% . Italy’s closely watched bond yield gap over Germany was around 213 bps, up from 205 bps late on Friday.

Ratings agency Moody’s cut Italy’s outlook to “negative” from “stable” on Friday, weeks after Prime Minister Mario Draghi’s resignation sparked fresh political uncertainty. read more

Two-year Treasury yields rose to 3.19%, around 40 basis points above 10-year yields.

Bonds also gained a safe haven amid jitters over Beijing’s saber rattling of Taiwan as China conducts four days of military exercises around the island. read more

DOLLAR EXCEPTIONALISM?

The U.S. dollar fell 0.3% against a basket of currencies to 106.34, giving up some gains after a boost in the jobs boom and a jump in yields.

However, it rose 0.2% against the Japanese yen to 134.75 yen, after jumping 1.6% on Friday.

Currency analysts were positive about the dollar’s outlook.

“Data like this will further any thoughts of ‘American exceptionalism’ and is very positive for the USD against all currencies,” said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank, referring to the US jobs data.

The euro squeezed out small gains to reach $1.021.

Bitcoin and other cryptocurrencies, which tend to act as a barometer of risk appetite, won. Bitcoin was last up 3.9%.

Gold managed to bounce off Friday’s lows to rise 0.5% to $1,782.

Erasing earlier gains, Brent crude futures fell 1.8% to $93.26 a barrel. US West Texas Intermediate crude CLc1 was at $87.54 a barrel, down 1.7%.

Reporting by Tom Wilson in London; additional reporting by Wayne Cole in Sydney; Editing by Jacqueline Wong, Bradley Perrett and Jan Harvey

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