London (AFP) – Asian and European stock markets mostly rose Friday as tech firms rebounded and investors reacted to the receding prospects of higher US borrowing costs. With US markets closed in observance of the Independence Day holiday, Thursday’s sizeable miss on US job creation—which reduced the likelihood of a Federal Reserve interest-rate hike—continued to drive trading. Earlier in the week, the yen fell to a 40-year low versus the dollar on prospects of US rate hikes, but has since recovered some ground.
“A mixture of relief post the payrolls data, a reversal of the sell-off in the chip stocks and more volatility in the yen are the main narratives,” noted Kathleen Brooks, research director at XTB trading group. Investors welcomed key data Thursday showing the US economy added fewer than half the jobs forecast in June, while figures for the previous two months were revised down. The readings suggested the labor market was not as strong as thought, giving the Fed some breathing room to hold off from hiking rates, thus boosting global markets.
Speculation had grown since the central bank’s June policy meeting that it would announce a rate increase this year due to elevated inflation and after new Fed boss Kevin Warsh stated that price stability was his key goal. Against this backdrop, the likelihood of a US rate hike before the end of the year remains, according to some analysts. “The US labor market today is not strong enough to instigate rate hikes but importantly is no longer a handbrake or impediment to hikes,” said Rodrigo Catril, analyst at National Australia Bank.
Concerns about surging valuations for technology companies amid a race for all things AI continued to dominate sentiment. Seoul’s Kospi stock index closed up 5.8 percent Friday—having tanked by about 20 percent from its June 19 record high—boosted by strong rallies in technology firms SK Hynix and Samsung. Tokyo climbed more than one percent, along with Hong Kong, Manila, Bangkok, and Jakarta. European indices rose, benefiting from the changed US interest rate outlook as well as a search for value.
“Lower US rate expectations ease pressure on global borrowing costs and reduce the risk of capital flowing away from Europe toward higher-yielding US assets,” said Trade Nation analyst David Morrison. He added that European indices are less exposed to AI stocks and that “the stocks within them trade on much lower P/E multiples than those typically seen over in the US.” The price to earnings (P/E) ratio—representing the price of a share in multiples of its earnings per share—provides a comparative measure of how much investors are willing to pay for each dollar or euro of earnings. European shares have been relatively cheap compared to US shares by this measure.
Oil prices steadied as markets tracked developments in the US-Iran talks and traffic flows through the Strait of Hormuz.
**Key figures around 1530 GMT**
– London – FTSE 100: UP 0.3 percent at 10,679.03 points (close)
– Paris – CAC 40: UP 0.4 percent at 8,508.07 (close)
– Frankfurt – DAX: UP 0.8 percent at 25,779.31 (close)
– Seoul – Kospi: UP 5.8 percent at 8,088.34 (close)
– Tokyo – Nikkei 225: UP 1.5 percent at 69,744.07 (close)
– Hong Kong – Hang Seng Index: UP 1.3 percent at 23,350.03 (close)
– Shanghai – Composite: UP 0.4 percent at 4,043.64 (close)
– New York – Dow: Closed for public holiday
**Currency and Oil Prices**
– Dollar/yen: UP at 161.29 yen from 161.12 yen
– Euro/dollar: DOWN at $1.1442 from $1.1429
– Pound/dollar: UP at $1.3355 from $1.3345
– Euro/pound: UP at 85.68 pence from 85.65 pence
– Brent North Sea Crude: FLAT at $71.82 a barrel
– West Texas Intermediate: DOWN 0.2 percent at $68.53 a barrel
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© 2024 AFP
