Global stocks rallied Friday, with US and German markets hitting records after a lackluster US jobs report raised expectations the Federal Reserve could take a more gradual approach to increasing interest rates.
The Nikkei in Japan also surged, ending at a 22-month high, while Britain’s FTSE finished near flat as election uncertainty continued to weigh on sentiment.
The US jobs report showed unemployment in May fell to 4.3 percent, a 16-year low. But the economy added just 138,000 jobs last month, far below expectations, while wage growth remained anemic, rising just 0.2 percent for the month.
The Fed still is expected to hike interest rates later this month, but analysts said the employment report weakened the chances the central bank will accelerate tightening efforts later this year.
“The market is beginning to rethink the Fed’s course and whether there will still be two interest rate increases by the end of the year, plus a reduction of the balance sheet,” said Gregori Volokhine, president of Meeschaert Capital Markets.
“The report was not bad, but was also not too good,” he added.
All three US indices notched records for the second day in a row, with the Nasdaq leading the way with a 0.9 percent gain.
Some market watchers have begun to express discomfort at the latest stock surge. Continued worries about politics and terrorism raise the question of whether the records are justified by economic fundamentals or are another case of “irrational exuberance,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
“The bottom line still appears to be slightly unrealistic expectations instead of irrational,” he said, while noting that more investors are on guard for signs of market skittishness.
The worries include unknowns over investigations into President Donald Trump over connections to Russia, and the effect of the probes on the broader Washington agenda.
Elsewhere, Frankfurt’s DAX 30 jumped 1.3 percent to a record close at 12,822.94 points.
London’s FTSE 100 hit another intraday record, before trimming gains ahead of next week’s British election. It closed 0.1 percent higher.
The Nikkei gained 1.6 percent to finish at 20,177.28, the first time it has crossed 20,000 since December 2015 and the highest since August that year.
Oil prices tumbled on concerns of a ramp-up in fossil-fuel production following Trump’s controversial decision to withdraw the United States from the Paris climate agreement.
The dollar retreated against the euro and other major currencies after the US jobs report.
New York – Dow: UP 0.3 percent at 21,206.29 (close)
New York – S&P 500: UP 0.4 percent at 2,439.07 (close)
New York – Nasdaq: UP 0.9 percent at 6,305.80 (close)
Euro/dollar: UP at $1.1283 from $1.1211 at 2100 GMT on Thursday
Dollar/yen: DOWN at 110.44 yen from 111.40 yen
Pound/dollar: UP at $1.2889 from $1.2881
Oil – Brent North Sea: DOWN 68 cents at $49.95 per barrel
Oil – West Texas Intermediate: DOWN 70 cents at $47.66 per barrel
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