Wall Street stocks were on track to hit a new record on Friday after US jobs data exceeded analysts’ expectations, signalling that the labour market in the world’s largest economy is continuing to recover.
The blue-chip S&P 500 index, which has risen for 15 of the past 17 days to an all-time high, gained 0.7 per cent, as did the technology-focused Nasdaq Composite.
The yield on the benchmark 10-year US Treasury note fell 0.03 percentage points to 1.495 as the price of debt rose, pushing government bonds in most major markets higher as traders kept faith in the Federal Reserve waiting for more jobs data before moving towards raising interest rates.
Employers in the world’s largest economy added 531,000 new jobs in October, beating the average forecast of analysts polled by Reuters of 450,000 new hires.
There were “notable job gains” in the pandemic-sensitive leisure and hospitality sectors, the US Bureau of Labor Statistics said, while the number of people who said they were not looking for work because of Covid-19 declined on the prior month.
The Fed this week confirmed plans to reduce its $120bn monthly bond purchases that have lowered borrowing costs and boosted stock markets since March 2020, but also said it would be “patient” in terms of raising interest rates from record lows.
Despite the positive surprise in October, jobs growth stalled during August and September.
“A few more quarters of these equivalent strong gains will surely tip the Fed to become more focused on the rate side of the equation, but that is still a story for the middle of next year,” said Charles Hepworth, investment director at GAM Investments.
“We do not think the Fed will start hiking until 2023,” added Hani Redha, managing director at PineBridge Investments. “We’re still a way away from tighter monetary conditions.”
Europe’s regional Stoxx 600, which has closed higher for nine of the past 10 sessions, rose 0.2 per cent.
During the ongoing quarterly earnings season, US companies on aggregate have increased earnings per share by 43 per cent compared with the same period last year, beating analysts’ estimates for 13 per cent growth, according to Barclays. European companies have also widely surpassed estimates.
“There was a lot of concern about input price inflation and supply chain disruptions,” said Nick Nelson, head of global and European equity strategy at UBS. “What has really surprised people has been how strong corporate pricing power has been.”
Headline annual consumer price inflation is running at above 5 per cent in the US, while the Bank of England has forecast a rise to similar levels in the UK by next spring, largely driven by supply chain disruptions related to Covid-19 and higher energy prices.
Elsewhere in markets, UK government bonds continued rallying and sterling weakened after the BoE surprised traders on Thursday by holding interest rates at 0.1 per cent despite signalling that it was ready to raise them.
The yield on the two-year gilt, which tracks interest rate expectations, dropped 0.07 percentage points to 0.421 per cent after also falling on Thursday by its largest amount since March last year.
The 10-year gilt yield slid 0.07 percentage points to 0.875 per cent, having traded above 1.07 per cent before the BoE’s decision.
Sterling slipped 0.3 per cent against the dollar to $1.34, taking its two-day drop to about 1.7 per cent.