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Wall Street stocks rebounded on Friday after jobs growth in the US far outstripped economists’ expectations, signalling that the labour market remains strong despite high interest rates.
The benchmark S&P 500 was up 1.3 per cent by early afternoon in New York, while the tech-heavy Nasdaq Composite gained 1.5 per cent.
The US added 303,000 jobs in March, far above the 200,000 forecast by economists polled by Reuters. The unemployment rate also dropped unexpectedly, to 3.8 per cent from 3.9 per cent, according to the Bureau of Labor Statistics.
The data signalled that “the economy isn’t showing any signs of slowing down and consumer spending should be able to hold up in the near term”, said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
The moves reversed a steep sell-off in the previous trading session, which came as fears of flaring tensions in the Middle East sent oil prices to five-month highs above $90 per barrel, sparking concerns that stubborn inflation could delay central banks cutting interest rates.
The S&P 500 fell 1.2 per cent on Thursday, its biggest one-day drop since mid-February, as traders weighed the potential of a widening conflict in the Middle East and a possible Iranian retaliation for a suspected Israeli attack on its consulate in Damascus.
Stocks in Europe and Asia mirrored this decline on Friday.
The region-wide Stoxx Europe 600 fell 0.8 per cent, as did London’s FTSE 100. France’s Cac 40 fell 1.1 per cent and Germany’s Dax dropped 1.2 per cent.
Japan’s Topix closed 1.1 per cent lower, while South Korea’s Kospi dropped 1 per cent and Hong Kong’s Hang Seng fell 0.4 per cent.
Analysts said higher energy prices raised the possibility of the Federal Reserve and the European Central Bank lowering interest rates more slowly this year.
“Surging oil is reviving stagflation fears,” said Emmanuel Cau, head of European equity strategy at Barclays.
Oil prices have climbed higher in recent weeks as forecasts for global demand began to outstrip supply growth, and economic data pointed to a stronger-than-expected economic recovery in the US, Europe and China.
Brent crude, the international benchmark, traded as high as $91.71 on Friday, the highest level since last October.
Bob Ryan, a commodity and energy strategist at BCA Research, said “it wouldn’t be a surprise” if prices hit $100 a barrel this year as the Opec+ cartel of major oil producers looks set to maintain the voluntary production cuts that have successfully drawn down inventories.
Supply growth outside of Opec+ has also been weaker than previously anticipated, leading the International Energy Agency to forecast in March that the oil market would be in a “slight deficit” this year, reversing its previous predictions of a surplus.
“These levels are manageable,” said Francisco Blanch, head of global commodities at Bank of America. “If we go much higher — above $100 — it’s going to cause real problems for the Fed.”
Traders will be paying close attention to the latest non-farm payrolls and unemployment data from the US, due later on Friday, for further clues on the outlook for interest rates in the world’s largest economy.
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