Stocks slump, dollar boosted by US jobs data

Stocks slid and the dollar surged Friday after US jobs data showed only a timid slowdown in the labour market, setting the stage for further aggressive interest rate hikes.

Equity markets have taken a battering in the past couple of months as the US Federal Reserve has made it clear it intends to continue aggressively raising interest rates until soaring inflation is tamed, even if that means sending the economy into a recession.

There was a brief rebound at the start of the week as investors hoped data pointing to an economic slowdown would allow the Fed to “pivot”, or slow down rate hikes.

However, the jobs report shows the US labour market is still robust, with hiring in the US economy slowing slightly in September, to a net gain of 263,000 jobs, from 315,000 in August.

That was more than the consensus forecast for a net gain of 250,000, sending equities lower and the dollar higher.

“Those hoping for a Fed pivot have been sorely disappointed with today’s job numbers, which have confirmed that US economy continues to rumble along quite well,” said Chris Beauchamp, chief market analyst at online trading platform IG.

“The latest bear market bounce has now begun to wilt as investors wearily return to expectations” of a couple more considerable rate hikes this year, followed by more in 2023.

Wall Street was sharply lower in late morning trading, with the Dow sliding 1.5 percent. The broader S&P 500 index fell 2.0 percent and the tech-heavy Nasdaq Composite tumbled 2.8 percent.

In Europe, Frankfurt fell 1.6 percent and Paris shed 1.2 percent. London ended the day less than 0.1 percent lower.

“Investors are simultaneously fretting that the fall in the pace of hirings indicates a slowing economy, but also that the better-than-expected data shows that the jobs markets hasn’t slowed enough to stop the Fed from hiking rates aggressively,” said markets analyst Susannah Streeter at Hargreaves Lansdown brokerage.

– ‘Pivot party gang’ –

Rising interest rates boost the dollar as foreign investors seek to buy dollar-denominated debt. But high interest rates raise borrowing costs and dampen consumption, which are bad for companies and thus their share prices.

Stephen Innes at SPI Asset Management said it is “unsurprising to see solid dollar buying with stocks and gold tanking as the labour market strength should quieten any Fed pivot talk for now, if not deal a severe knockout blow to the pivot party gang.”

The next data point that the Fed, and investors, will be scrutinising is the consumer price index report next week.

Adding to unease on markets was a warning from US President Joe Biden that the world faced nuclear “Armageddon” for the first time since the 1962 Cuban missile crisis.

He told a Democratic Party fundraiser in New York that Russian President Vladimir Putin was “not joking” when he threatened to use nuclear weapons over the Ukraine war.

Elsewhere, oil prices jumped and were set for their biggest weekly gain since March after OPEC and other major producers led by Russia agreed to slash daily output by two million barrels.

– Key figures around 1530 GMT –

New York – Dow: DOWN 1.5 percent at 29,480.26 points

EURO STOXX 50: DOWN 1.7 percent at 3,375.46

London – FTSE 100: DOWN less than 0.1 percent at 6,991.09 (close)

Frankfurt – DAX: DOWN 1.6 percent at 12,273.00 (close)

Paris – CAC 40: DOWN 1.2 percent at 5,866.94 (close)

Tokyo – Nikkei 225: DOWN 0.7 percent at 27,116.11 (close)

Hong Kong – Hang Seng Index: DOWN 1.5 percent at 17,740.05 (close)

Shanghai – Composite: Closed for a holiday

Pound/dollar: DOWN at $1.1119 from $1.1161 on Thursday

Euro/dollar: DOWN at $0.9787 from $0.9794

Euro/pound: UP at 87.95 pence from 87.74 pence

Dollar/yen: UP at 145.20 yen from 145.11 yen

Brent North Sea crude: UP 3.0 percent at $97.28 per barrel

West Texas Intermediate: UP 3.4 percent at $91.49 per barrel

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