Shares held firm and the dollar edged up on Monday as investors priced in reduced odds of a June rate hike by the Federal Reserve after a mostly encouraging U.S. jobs report, while oil prices jumped after Saudi Arabia pledged big output cuts.
The benchmark European STOXX index (.STOXX) nudged up 0.1% in early trading, led by gains in the oil & gas sector index (.SXEP) and echoing a 0.2% gain in MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS).
Japan’s Nikkei (.N225) had earlier surged 2.1% to stand above 32,000 for the first time since July 1990, reported Reuters.
While markets failed to resume last week’s rally, the data released on Friday showing wage pressures easing and the unemployment rate climbing off a 53-year low gave hope that the Fed is making further progress against inflation.
That in turn could mean a pause in rate hikes is decided at its June 13-14 meeting, even as the data released at the end of last week also showed payrolls far outstripping forecasts, a potentially inflationary signal.
Those mixed signs and the lack of fresh indications on Fed policy set U.S. share markets up for a directionless session early on Monday, with with S&P 500 futures up 0.06% while Nasdaq futures dipped slightly.
Oil prices, which have recently come under pressure amid heightened concerns about China’s slowing economy, rose after Saudi Arabia announced it would cut its output to 9 million barrels per day in July, from around 10 million bpd in May, the biggest reduction in years.
Brent oil rose 1.7% to $77.44 a barrel by 1100 GMT, giving up some of its earlier gains to as high as $78.73, while US crude climbed 1.85% to $73.07 a barrel, after hitting a session high of $75.06.
“With Saudi Arabia protecting oil prices from sliding too low ... we think oil markets are now more prone to a shortfall later this year,” said Vivek Dhar, a mining and energy commodities strategist at Commonwealth Bank of Australia.
“We think Brent futures will rise to $85 by Q4 2023 even with a tepid demand recovery in China factored in.”
Data on Friday showed the US economy added 339,000 jobs last month, higher than most estimates, but moderating wage growth and the rising jobless rate led markets to price a 75% chance of no change in Fed rates in June, according to the CME FedWatch tool.