LONDON (Reuters) – Shares globally were just 2.5% short of an all-time high on Friday, as a surprise bounce in Chinese manufacturing and some reassuring U.S. jobs numbers eclipsed a blizzard of otherwise sickly global data.
Reports of more U.S.-China trade difficulties, impeachment strains on Washington, the first day at the ECB without Mario Draghi and Brexit jockeying were all in the mix too, but markets marched on.
Wall Street’s S&P 500 looked to be heading back toward a record high after payrolls growth slowed less than expected, and Europe’s STOXX 600 extended its gains to 0.6%, having also been lifted by the news that China’s factory activity expanded at the fastest pace in more than two years.
That had helped Asia too. Chinese blue chips .CSI300 jumped 1.7% in their best day since mid-August, Seoul’s Kospi .KS11 rose 0.8% and Hong Kong’s Hang Seng .HSI added 0.7% despite data confirming protests there had pushed city into its first recession in a decade.
“I think it was a very good U.S. payrolls report, especially if you take into account there was a strike at GM and census workers left (after the census finished), said Rabobank’s Philip Marey said.
“It shows that at least the job motor is still running in the U.S.”
There had been a slight wobble in sentiment overnight after a Bloomberg report citing unnamed Chinese officials airing doubts over whether a comprehensive long-term trade deal is possible, but it seemed to have passed.
The initial “phase one” pact, aimed at ending the bruising 16-month trade war, appears to be in “good shape” and is likely to be signed around mid-November, U.S. Commerce Secretary Wilbur Ross said in a Fox interview on Friday.
The pact was to be sealed in Chile at an Asia-Pacific trade meeting, but the host country canceled the summit amid widespread protests against the government.
Monthly U.S. payrolls figures are always closely scrutinized by traders as an up-to-date gauge of U.S. economic health. Friday’s batch showed they increased by 128,000 last month, well above forecasts of 89,000 new jobs.
The economy also created 95,000 more jobs in August and September than previously estimated and average hourly earnings increased 6 cents, or 0.2%, after being unchanged in September. That put the annual increase in wages to 3.0% in October.
It all helped lift the spirits of a dollar heading for its fourth weekly drop in the last five.
The greenback clawed back above 108 yen JPY= but was on track for its biggest weekly loss against the Japanese currency since Oct. 4.
Earlier it had also hit a 10-day low versus the euro at $1.1165, EUR=EBS after the Federal Reserve cut U.S. interest rates for a third time this year on Wednesday.
There was still ISM manufacturing PMI data to come later. It is expected to see a rise to 48.9 from 47.8 in September but a separate PMI survey from the Chicago Fed USCPMI=ECI on Thursday had shown a sharper contraction in Midwestern manufacturing activity for October.
Government bond yields – which move inversely to a bond’s price – were also lifted by the U.S. jobs data.
Benchmark U.S. Treasuries were offering 1.7% and euro zone yields inched higher too though they were still on course for their biggest weekly decline in five weeks as Christine Lagarde officially began her presidency of the European Central Bank.
Analysts said the resumption of asset purchases by the ECB this week had also been helping the bond markets, though focus is already turning to what Lagarde will do during her eight-year term.
The decision to resume asset purchases has divided the central bank and fueled a perception in markets that the bar to further monetary easing is now high.
Having discounted an ECB depo rate of close to -0.8% just a couple of months ago, the market no longer expects another cut of 10 basis points in 2020 ECBWATCH.
“It’s pretty clear that Lagarde has an uphill task in trying to promote unity that leads to a coherent set of policies going forward,” said Philip Shaw, chief economist at Investec. “Her own views can be characterized as continuity with” former ECB chief Mario Draghi.
Among the main commodities, oil prices were little changed on Friday but set for a slide of around 3.5% on the week, hurt by rising global supply and concerns about future demand. [O/R]
U.S. crude inventories USOILC=ECI rose by 5.7 million barrels in the week to Oct. 25, dwarfing analyst expectations for an increase of just 494,000 barrels.
Brent crude LCOc1 ticked up 27 cents, or 0.4%, at $59.89 a barrel by 0955 GMT, on course for a drop of about 3.4% for the week.
West Texas Intermediate crude CLc1 rose 32 cents to $54.50 a barrel, which would leave it with a weekly loss of more than 3.8%.
Graphic: China PMIs, here
Additional reporting by Andrew Galbraith in Shanghai and Dhara Ranasinghe in London; Editing by Angus MacSwan and Steve Orlofsky