LONDON, UNITED KINGDOM – Stocks mostly slid and the dollar surged Friday after US jobs data showed only a timid slowdown in the labor market, setting the stage for further aggressive interest rate hikes.
Equity markets have taken a battering in the past couple of months as the US Federal Reserve has made it clear it intends to continue aggressively raising interest rates until soaring inflation is tamed, even if that means sending the economy into a recession.
There was a brief rebound at the start of the week as investors hoped data pointing to economic slowdown would allow the Fed to “pivot”, or slow down rate hikes.
However, the jobs report shows the US labor market is still robust, with hiring in the US economy slowing slightly in September, to a net gain of 263,000 jobs, from 315,000 in August.
That was more than the consensus forecast for a net gain of 250,000, sending equities lower and the dollar higher.
“The understanding that the report is unlikely to soften the Fed’s rate hike path has sent equity futures to lows while the dollar is showing continued strength against the euro and Sterling,” said Briefing.com analyst Patrick O’Hare before Wall Street opened.
Wall Street opened lower, with the Dow sliding 0.9 percent. The broader S&P 500 index fell 1.2 percent and the tech-heavy Nasdaq Composite tumbled 1.8 percent.
In afternoon trading, Frankfurt slid 0.8 percent and Paris shed 0.5 percent. London was flat.
Pivot party gang
Rising interest rates boost the dollar as foreign investors seek to buy dollar-denominated debt.
Stephen Innes at SPI Asset Management said it is “unsurprising to see solid dollar buying with stocks and gold tanking as the labor market strength should quieten any Fed pivot talk for now, if not deal a severe knockout blow to the pivot party gang.”
The next data point that the Fed, and investors, will be scrutinizing is the consumer price index report next week.
Adding to unease on markets was a warning from US President Joe Biden that the world faced nuclear “Armageddon” for the first time since the 1962 Cuban missile crisis.
He told a Democratic Party fundraiser in New York that Russian President Vladimir Putin was “not joking” when he threatened to use nuclear weapons over the Ukraine war.
Elsewhere, oil prices jumped and were set for their biggest weekly gain since March after OPEC and other major producers led by Russia agreed to slash daily output by two million barrels.