Wariness returned to investment markets in the past week led in part by worries about Italian banks and Brexit, but this was reversed to some degree on Friday by the strong US jobs data.
As a result share markets were mixed over the week with eurozone shares down 1.6%, Japanese shares down 3.7% (not helped by the rising Yen) and Australian shares eased 0.3%.
But US shares rose 1.3% (to around a record high for the S&P 500) and Chinese shares rose 1.2%.
Friday night saw a very sold performance in Europe – eurozone shares gained 2.1%, while the US S&P 500 rose 1.5% to around its record high (accounting for all the week’s rise of 1.3%), despite the big jobs report for June getting some analysts talking about the timing of the next US rate rise.
As a result of the strong global lead, ASX 200 futures rose 61 points or 1.2%, pointing to a solid gain for the Australian share market when it opens this morning. The Aussie dollar started trading around 75.70 in Asia this morning after a solid end to last week.
News that the US economy had created 287,000 jobs last month – the best since October – helped the S&P 500 rise on Friday and took the benchmark index weekly gains to 1.3%.
The Dow rallied 1.4% on Friday and was up 1.1% for the week, while Nasdaq added 79.95 points, or 1.6%, and was up around 1% for the week.
The better than expected job creation alongside better-than-expected services and manufacturing reports published this month have helped ease concerns on the health of the US economy and helped the major equity indices erase their post-Brexit losses.
The S&P briefly traded above its record close but ended less than a point below it and was three points away from the all-time intraday high of 2,134.72 reached in May 2015.
Ten and 30 year US Treasury yields closed at record lows on Friday, at the same time as the US stock market pushed close to new highs. This week investors have to contend with the start of the second quarter earning season this week (with Alcoa reporting tonight, plus three big US banks later in the week).
Some analysts said the strong jobs number could put an interest rate rise from the Federal Reserve back on the table, even as concerns linger over the global economic impact from Britain’s vote last month to leave the European Union.
The Fed meets at the end of the month and this week also sees the release of the so-called Beige Book, which contains anecdotal reports of economic activity from across the US.
Wells Fargo, Citigroup and JPMorgan report this week and could change the view of the reporting season if they produce better than forecast figures. On Friday, the benchmark ASX200 Index rose 0.05% and the All Ordinaries Index 0.09% to 5230.5 and 5315.6 points respectively ahead of the US jobs report.
For the week, the ASX 200 and the All Ords finished down 0.3% and 0.2% respectively.
