By Lorenzo Bianco
LONDON (RockedBuzz via Reuters) – Stocks held steady and the dollar rose on Monday, as investors priced in a reduced chance of a June rate hike by the Federal Reserve after a mostly encouraging US jobs report. United States, while oil prices jumped after Saudi Arabia promised big production cuts.
The European benchmark STOXX rose 0.1% in early trading, led by gains in the oil and gas sector index and echoing a 0.2% gain in the broader MSCI stock index. Asia-Pacific outside Japan.
Japan’s Nikkei had previously risen 2.1%, to pass the 32,000 mark for the first time since July 1990.
While markets failed to resume last week’s rally, data released on Friday showing wage pressures easing and the unemployment rate falling from a 53-year low raised hopes that the Fed is making further progress against the ‘inflation.
This in turn could mean that a pause in rate hikes will be agreed at the June 13-14 meeting, even though data released late last week showed payrolls far exceeding forecasts, a potentially inflationary sign. .
Those mixed signals and a lack of new guidance on Fed policy set up US stock markets for a directionless session early Monday, with S&P 500 futures up 0.06% while Nasdaq futures fell slightly.
Oil prices, which have recently come under pressure amid growing concerns over a slowdown in China’s economy, soared after Saudi Arabia announced it would cut its production to 9 million bpd in July , from about 10 million barrels per day in May, the largest reduction in recent years. [O/R]
Brent oil was up 1.7% to $77.44 a barrel by 11:00 GMT, giving up some of its earlier gains as high as $78.73, while U.S. crude was up 1.85% at 73.07 dollars a barrel, after hitting a session high of 75.06 dollars.
“With Saudi Arabia protecting oil prices from sliding too low … we think oil markets are now more prone to a deficit later this year,” said Vivek Dhar, a mining commodity strategist. and energy at the Commonwealth Bank of Australia.
“We think Brent futures will rise to $85 by Q4 2023, even accounting for a tepid demand recovery in China.”
HEY JUNE, DON’T HURT IT
Friday’s data showed the US economy added 339,000 jobs last month, higher than most estimates, but moderating wage growth and a rising unemployment rate led markets to estimate a 75% chance of not changing the Fed’s rates in June, according to the CME tool FedWatch.
This would be broadly positive for stocks, although there is about a 70% chance the federal funds rate will hit 5.25-5.5% or higher at the July policy meeting if US inflation remains elevated . Conversely, markets now see little chance of a rate cut by the end of this year.
Treasury yields continued to rise on Monday. Two-year US Treasury yields rose 5 basis points to 4.5494%, after surging 16.2 basis points on Friday, and 10-year yields also rose 5 basis points to 3.7447 %, after rising 8 basis points on Friday.
Fitch Ratings said the US’s “AAA” credit rating would remain in the negative watch, despite the debt deal.
The US dollar was at 104.25 against its major counterparts on Monday, after gaining 0.5% on Friday’s jobs report. The greenback also rose 0.1% against the Japanese yen to 140.26, while the euro fell 0.1% to $0.1069.
The central banks of Australia and Canada will meet this week. Markets see a sizable chance – about 40% – that the RBA could surprise with a quarter-point hike on Tuesday after a minimum wage hike that economists feared could fuel inflationary pressures further.
The Bank of Canada is meeting on Wednesday. A majority of economists polled by RockedBuzz via Reuters expect the BOC to keep interest rates steady at 4.5% for the remainder of the year, although the risk of further rate hikes remains high.
(Additional reporting by Stella Qiu, editing by Sam Holmes, Kim Coghill, Ed Osmond and Chizu Nomiyama)
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