Global Markets Rally as US Jobs Report Signals Cooling Labor Demand
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Global equity markets posted strong gains on Friday following a U.S. labor report that showed signs of a cooling job market, bolstering hopes that the Federal Reserve could initiate rate cuts later this year.
The U.S. economy added 172,000 jobs in June, falling short of economists’ expectations of 190,000 and marking the weakest monthly gain since November 2023. The unemployment rate ticked up to 4.1%, while average hourly earnings grew at a slower pace of 0.2% month-over-month.
Wall Street responded positively to the data. The S&P 500 rose 1.1%, the Dow Jones gained 0.8%, and the Nasdaq rallied 1.5% on renewed optimism that the Fed’s aggressive tightening cycle may finally be nearing an end.
“This report was the pivot markets were waiting for,” said Brian Madsen, chief U.S. strategist at Ardent Capital. “It shows the labor market is softening without collapsing — the sweet spot for policymakers looking to bring inflation down without triggering a deep recession.”
The bond market also reflected the shift in expectations. The yield on the U.S. 10-year Treasury note fell to 4.29%, while the two-year yield declined more sharply to 4.52%, signaling that traders now see an increased likelihood of a rate cut in September.
In Europe, the STOXX 600 index climbed 0.9%, led by gains in tech, industrials, and real estate sectors. The FTSE 100 advanced 0.6%, while Germany’s DAX rose 1.2%. European markets tracked U.S. sentiment closely, with analysts suggesting the ECB may also take a more dovish stance if inflation continues to trend downward.
Asian markets closed mostly higher before the U.S. jobs report was released. The Nikkei 225 rose 0.4%, while South Korea’s KOSPI gained 0.6%. Hong Kong’s Hang Seng index finished flat as investor sentiment remained cautious over China’s economic rebound.
In currency markets, the U.S. dollar retreated modestly against a basket of peers. The euro and British pound both strengthened, while the Japanese yen gained ground, prompting renewed speculation about possible intervention by the Bank of Japan.
Gold prices rose to $2,345 per ounce, their highest in nearly two weeks, as lower yields and a weaker dollar supported the precious metal. Bitcoin also bounced back slightly to trade near $57,000 after a sharp sell-off earlier in the week.
Investors will now turn their attention to upcoming inflation data, as well as earnings season, which kicks off next week. For now, markets appear encouraged that central banks may finally be able to ease up on the brakes.
