Dollar drops, stocks climb as weak US jobs data eases rate fears

The US economy unexpectedly lost 23,000 jobs in July, a significant downturn that has eased concerns about an imminent interest rate hike by the Federal Reserve. This economic blow has boosted stock markets, with the S&P 500 closing at a new record high, the Nasdaq gaining over one percent, and the Dow also finishing in positive territory. European markets mirrored this trend, with Paris, Frankfurt, and Milan reaching all-time highs.

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likely to revive concerns among Fed officials about the health of the labour market and make them less inclined to commit to near-term tightening.

Economists suggest the weak jobs data will make Federal Reserve officials more hesitant to tighten monetary policy in the near term. This development has provided a respite in the rise of Treasury yields, removing a headwind for equities. Stocks have recently surged, driven by tech companies and positive corporate earnings that eased fears about the payoff from AI investments.

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It certainly changed the dynamic of the predicting markets about monetary policy.

Adding to the optimism, hopes for an imminent US-Iran deal to resolve the blockage of the Strait of Hormuz had previously supported markets. However, oil prices turned higher ahead of the weekend as no confirmation of an accord emerged, with reports suggesting Iran might block US and Israeli ships. Analysts believe oil prices will not return to pre-war levels without concrete signs of progress, especially given conflicting statements from officials on both sides.

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There was a little bit of a respite in the rise in Treasury yields ... and that also takes away a bit of a headwind for equities.