Monday 21:05 BST. Asian and European stock markets made a positive start to the week as the afterglow from Friday’s robust US non-farm payrolls report helped bolster confidence in the outlook for the global economy.
The mood was also lifted by an easing of tensions between pro-democracy protesters and the authorities in Hong Kong, with students opening some barricades to allow government staff to get to work.
But Wall Street itself was far less sanguine, in spite of a sharp rise for Hewlett-Packard shares, as trading conditions remained choppy ahead of the start of the quarterly earnings season.
The S&P 500 equity index slipped 0.2 per cent, a day after recording its biggest single-session gain for two months. HP shares rose 4.5 per cent after the company unveiled plans to split its PC and printer arm from its software and corporate hardware business.
The pan-European FTSE Eurofirst 300 index rose 0.2 per cent, while the UK’s FTSE 100 climbed 0.6 per cent. In Tokyo, the Nikkei 225 rose 1.2 per cent.
Hong Kong stocks had their best day in a month as the Hang Seng index rose 1.1 per cent as the market breathed a sigh of relief that force had not been used to clear protesters from the streets.
“While the situation remains difficult to predict and risky, we continue to expect further de-escalation,” analysts at Crédit Agricole said.
Meanwhile, the dollar took a breather after advancing to a four-year high in the wake of the US jobs data. The dollar index, a measure of the US currency’s value against a weighted basket of peers, was down 1.1 per cent, as the euro gained 1 per cent to $1.2645 and the dollar shed 0.9 per cent against the yen to Y108.80.
Gold bounced off a nine-month low as the dollar paused, rising $16 to $1,207 an ounce.
Kit Juckes, strategist at Société Générale, argued that the dollar’s dip was likely to be only temporary, but said those betting on continued strength would need a constant flow of stronger data and stronger policy action – or at least comment – to feed their bullishness.
“The US labour report certainly helped,” he said. “The US economy isn’t booming, but it’s still doing enough to keep the Federal Reserve on track to raise rates from zero to almost nothing in mid-2015.
“And while that may not seem like much, the contrast with pressure for more easing in Japan and the eurozone, as well as the contrast between even modest acceleration in US growth and potential slowdown in the UK, and across emerging markets, is clear enough.”
US government bonds moved higher – reversing Friday’s payrolls- driven fall – as analysts gave a largely underwhelming response to the release of the Fed’s new Labour Market Conditions Index. The yield on the 10-year US Treasury was down 3 basis points at 2.42 per cent.
“Interpreting the new data is not easy and simply suggests that the recovery continues,” said Divyang Shah, global strategist at IFR Markets. “It will be the interpretation from the FOMC that counts, highlighting the importance of listening to what they say this week.”
Indeed, further clues on the prospects for US monetary policy may come this week with the release of the minutes of the Fed’s September Open Market Committee’s meeting.
“The key significance in this week’s FOMC minutes will be in the extent to which the policy discussion reveals growing confidence in the economy’s ability to withstand a policy shift away from the Fed’s current deflation-fighting extraordinarily accommodative stance,”
“Observers will be mainly focused on the chances that the Fed may drop its “considerable time” rate guidance at the forthcoming meeting on 29 October, but as seen from the market’s recent sensitivity to hawkish US data and Fed signals, the significance of that phrase has already been downgraded,” said Lena Komileva at G+ Economics.
The 10-year German Bund yield fell 2bp to 0.91 per cent after news that German factory orders contracted more than expected in August – continuing a recent run of worrying eurozone economic figures.
Meanwhile, Russia’s rouble briefly sank through the Rb40 per dollar mark for the first time, amid lingering concerns that Moscow could impose capital controls to stem cash outflows.
The currency subsequently rebounded, however, to stand 0.3 per cent higher on the day at Rs39.85.
The Brazilian real, meanwhile, rose 1.4 per cent versus the dollar – and the Bovespa stock index jumped 4.7 per cent as a surprise result in the first round of the country’s presidential election raised hopes that a substantial programme of reforms could be implemented.
Centrist candidate Aécio Neves secured second place in the poll and will now contest a run-off against incumbent president Dilma Rousseff.
Neil Shearing at Capital Economics said that while Ms Rousseff remained favourite to win, the momentum was with Mr Neves.
“If he can tap into rising discontent about cronyism and corruption within the current administration and transform himself into the ‘anyone but Dilma’ candidate, then he could yet prevail.”
Get alerts on Markets when a new story is published