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Wednesday, December 1, 2021

U.S. stocks rise after higher-than-expected employment data

After the US employment data exceeded analyst expectations, the Wall Street stock market is expected to hit a new high on Friday, indicating that the labor market in the world’s largest economy is continuing to recover.

The S&P 500 on Wall Street has risen to record highs in 15 of the past 17 days, opening up 0.5%. The technology-focused Nasdaq Composite Index rose 0.4%.

The yield on the benchmark 10-year U.S. Treasury note stabilized at 1.525%.

Employers in the world’s largest economy added 531,000 new jobs in October, surpassing the 450,000 new hires expected by analysts surveyed by Reuters on average.

According to the US Bureau of Labor Statistics, the epidemic-sensitive leisure and hospitality industries have seen “significant employment growth” Said, And the number of people who said they did not find a job because of Covid-19 declined in the last month.

The Fed confirmed this week that it plans to reduce its $120 billion monthly bond purchase program, which has reduced borrowing costs and boosted the stock market since March 2020, but also said it will take a patient stance to raise interest rates from the current record low .

Despite positive surprises in October, employment growth in August and September stagnated, increasing expectations of continued support for monetary policy.

“We think the Fed will not start raising interest rates until 2023,” said Hani Redha, managing director of PineBridge Investments. “We are still a long way from tightening monetary conditions.”

The European Stoxx 600 Index closed higher in 9 of the past 10 trading days, up 0.2%. The London FTSE 100 Index rose 0.6%.

European and US stock markets have risen in recent weeks as quarterly earnings reports that exceeded expectations indicate that companies are responding to inflationary pressures by passing on price increases to customers.

According to Barclays research, US companies’ earnings per share increased by 43% compared to the same period last year, exceeding analysts’ expectations of 13%. European companies also generally exceeded expectations.

Nick Nelson, head of global and European equity strategy at UBS, said: “In this reporting season, people have a lot of concerns about input price inflation and supply chain disruption.” “What really surprises people is how strong corporate pricing power is.”

The overall annual consumer price inflation rate in the United States exceeds 5%, and the Bank of England predicts that by next spring the United Kingdom will rise to a similar level, mainly due to Covid-19-related supply chain disruptions and rising energy prices.

In other markets, British government bonds continued to rise and the pound weakened after the Bank of England voted to maintain interest rates at 0.1% on Thursday, unexpectedly by traders, despite hinting that it was preparing to raise interest rates.

The yield on the two-year Treasury bond fell by 0.06 percentage points to 0.437%, and its yield was inversely proportional to the price of the debt. It also recorded the biggest drop since March last year on Thursday.

The 10-year U.S. Treasury bond yield fell 0.05 percentage points to 0.889%, trading above 1.07% before the Bank of England’s decision.

The pound fell 0.4% to US$1.34 against the US dollar, which is about 1.8% lower for two consecutive days.

Other market trends

  • In Asia, Tokyo’s Topix Index fell 0.7%. The Hong Kong Hang Seng Index fell 1.4% after the Chinese real estate developer Kaisa Group said it failed to pay interest on wealth management products.

  • The oil benchmark Brent crude oil rose 1% to US$81.33 per barrel, supported by the producer organization OPEC+’s insistence on a gradual increase in production plan on Thursday.

  • After the non-agricultural employment report was released, the U.S. dollar index, which measures the U.S. dollar against six other currencies, rose 0.2%.

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