Global stocks rise as weak US jobs data eases rate fears

Global stock markets rallied on Monday, buoyed by a surprisingly weak US jobs report that diminished expectations of further Federal Reserve interest rate hikes. The US economy shed 23,000 jobs in July, a figure that, along with downward revisions to previous months' data, suggested a cooling economy. This eased investor fears of rising borrowing costs, with the probability of a September rate increase falling significantly.

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Markets treated the report as a meaningful challenge to near-term Fed rate hike expectations, effectively concluding the Fed has time on its side.

Wall Street responded positively, with the S&P 500 reaching a new record high. Technology stocks, which typically benefit from lower interest rates, also saw substantial gains, helping the Nasdaq climb over one percent. The positive sentiment extended to Asian markets, with Tokyo's Nikkei 225 index surging more than two percent, led by advances in chipmakers like Tokyo Electron and Advantest. Seoul, Hong Kong, Shanghai, and other major Asian exchanges also posted gains.

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The report reduces the case that the labour market is adding inflation pressures, but it does not provide a clean green light for a dovish pivot.

However, rising oil prices, driven by Iran's insistence on controlling the Strait of Hormuz, introduced a note of caution. Crude prices continued their upward trend from the previous week. Investors are now awaiting upcoming inflation data, which will provide further clues on the Federal Reserve's next move. "Markets treated the report as a meaningful challenge to near-term Fed rate hike expectations, effectively concluding the Fed has time on its side," noted Rodrigo Catril of National Australia Bank. He cautioned, however, that the report does not signal a definitive dovish pivot, as inflation remains a primary concern for the central bank.

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The report is unlikely, by itself, to deter a September hike… inflation remains the more pressing side of the mandate. The next (consumer price index) prints (for July and August) ahead of the September Federal Open Market Committee meeting are the key data releases to watch.