Report by Singular Bank
The main indices closed with widespread gains, buoyed by a US jobs report that was weaker than expected, which dampened expectations of further interest rate rises by the Federal Reserve.
In Europe, the DAX led the gains with a 0.7 per cent rise, followed by the Euro Stoxx 50 (0.3 per cent), whilst the Ibex 35 gained a meagre 0.02 per cent on Friday but remains above the 20,000-point mark.
At the close of European trading, in the US, the Nasdaq 100 was the best-performing index, rising by 1.3%, buoyed by the technology sector. The S&P 500 advanced by 0.6% in a session in which the market interpreted the weakening employment figures as a sign of reduced pressure on the Fed to continue tightening.
At sector level, Technology, Healthcare and Communications led the gains on the Euro Stoxx 50. On the Ibex 35, Technology also stood out, whilst Materials was the weakest sector. In the US, Technology and Communications were once again among the best-performing sectors.
The key event of the day was the US jobs report. The economy unexpectedly shed 23,000 jobs in July, contrary to expectations of job creation, whilst the figures for May and June were revised downwards by 103,000 jobs. Although the unemployment rate fell to 4.1 per cent, the report as a whole pointed to a clearly less dynamic labour market.
The market reaction was positive, as the weakening in the labour market significantly reduced the likelihood of a rate rise in September. The move particularly favoured longer-duration assets, boosting the technology sector and causing a fall in sovereign bond yields, particularly in the US.
On the geopolitical front, negotiations over the Strait of Hormuz continued to make slow progress. Donald Trump noted that talks were progressing, although fresh Iranian attacks maintained a certain risk premium on energy commodities.
The European earnings season continued to provide additional support for equities.
Sovereign bond yields fell across the board following the US jobs report. The yield on the 10-year Treasury note fell by 3 basis points to 4.65 per cent, reflecting reduced expectations of further interest rate rises by the Fed. In Europe, the yield on the German Bund fell to 3.13 per cent and that on the Spanish bond to 3.56 per cent.
Brent crude rose by 1.2% to $83.5 per barrel.
Gold rose by 2.4% to $4,340 per ounce and is on track for its best week since January.
The EUR/USD exchange rate rose by 0.3% to 1.156.
