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Markets rally on strong US jobs data, trade optimism
LONDON, Nov 4, 2019 (BSS/AFP) – Asian and European markets rallied Monday after a forecast-busting US jobs report, and on growing optimism that China and the United States will finally sign off on a mini trade pact.
Investor sentiment was also lifted by British Airways owner IAG, which agreed to buy Spain’s Air Europa for 1.0 billion euros ($1.2 billion), sending its share price 1.4 percent higher in London.
“European stocks are starting off the week in positive fashion, with stocks following their Asian counterparts higher amid optimism over an upside surprise to Friday’s jobs report and US-China talks,” noted IG analyst Joshua Mahoney.
“Mining firms are on the front foot today, as markets continue to prepare themselves for a long overdue trade deal between the US and China.”
Most investors took their lead from another record-breaking pre-weekend close on Wall Street, which came at the end of a strong week for equities thanks to robust earnings and another Federal Reserve interest rate cut.
In addition, the Labor Department said the US created 128,000 net new jobs in October, surpassing the 80,000 expected, while the figure for the previous two months was also revised upwards.
Friday’s reading came days after data showed the world’s top economy slowed slightly in July-September but not as much as projected, which suggested it is stabilising.
The figures helped the S&P 500 to a new all-time high, while the Dow moved to within a whisker of its own record.
Asian investors took up the mantle on Monday, with Hong Kong, Seoul, Bangkok and Taipei each piling on more than one percent while Shanghai jumped 0.6 percent. In turn, Frankfurt, London and Paris each enjoyed gains of one percent or more.
The upbeat mood was enhanced by comments from Chinese Vice Premier Liu He that indicated trade talks with Washington were on track.
Liu said he had spoken on Friday to US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, with both sides saying the talks were “constructive”.
– Note of caution –
Progress on the discussions has provided support to equities for the past few weeks, with speculation that Donald Trump and Xi Jinping will meet this month to sign off on the mini pact.
While the agreement would only be the first part of a wider deal, it would be a major step after more than a year of a trade war that has undermined the world economy.
However, National Australia Bank’s Rodrigo Catril warned there were still important issues to address.
“As much as the US-China trade updates continue to point to a phase one deal looking like a certainty, the contentious issues on whether the US will cancel the planned December tariffs and remove some of the current tariffs in line with China’s demands remains an unknown and if the issue is not resolved then a deal could easily collapse,” he said in a note.
– Key figures around 1200 GMT –
London – FTSE 100: UP 1.0 percent at 7,377.82 points
Frankfurt – DAX 30: UP 1.2 percent at 13,111.06
Paris – CAC 40: UP 1.0 percent at 5,818.77
EURO STOXX 50: UP 0.9 percent at 3,657.78
Hong Kong – Hang Seng: UP 1.7 percent at 27,547.30 (close)
Shanghai – Composite: UP 0.6 percent at 2,975.49 (close)
Tokyo – Nikkei 225: Closed for a public holiday
New York – Dow: UP 1.1 percent at 27,347.36 (close)
Euro/dollar: DOWN at $1.1164 from $1.1166 at 2100 GMT
Dollar/yen: UP at 108.44 yen from 108.19 yen
Pound/dollar: DOWN at $1.2919 from $1.2946
Euro/pound: UP at 86.40 pence from 86.25 pence
Brent North Sea crude: UP 0.4 percent at $61.94 per barrel
West Texas Intermediate: UP 0.4 percent at $56.40
BSS/AFP/MMA/1930HRS