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The potential for a damaging spike in inflation caused by Friday's US jobs report, which showed wage pressures are building while cases of the Omicron variant are surging, was removed by Monday's rise in global shares.
Equity markets were rattled last week by rising bond yields and a more hawkish tone from the Federal Reserve, which looks set to tighten monetary policy faster than expected. Technology stocks, bonds and cryptocurrencies were all hammered.
By Monday, some stability had returned. US stock futures were higher, indicating a better start on Wall Street later. The S&P 500 futures were up 2% in early European trading, while the Dow Jones futures were up 1% and the Nasdaq 100 futures were up 1%.
A key read on US consumer inflation will be on Wednesday. The risk of another punishingly high number is high, following November's 30-year high of 6.8%. If the forecast is met, it will be the highest reading since June 1982.
This would likely cause the Fed to act quickly to prevent a damaging price rise, even as the Omicron coronaviruses cause cases of COVID-19 to surge.
The headline number fell short of expectations for the second month in a row. Michael Hewson, chief strategist for CMC Markets, said that the jobs report was much more positive.
The unemployment rate fell to a pre-pandemic level of 3.9% as the economy added 199,000 jobs in December. Wages rose 4.7%, compared with expectations for a 4.2% increase.
"These wages numbers seem to be what has put upward pressure on yields, as it becomes more apparent that the Fed is running out of excuses not to raise rates in the coming months," Hewson said.
Goldman says it expects the Fed to raise rates four times this year.
The confirmation of Powell as chairman of the Fed for a second term will give investors a better idea of the central bank's thinking.
The bond market lost more money Monday. The yield on the 5-year Treasury note rose almost a full quarter of a percentage point last week. It was last around 1.55%, its highest level since January 2020, up 5 basis points.
Despite a miss in Friday's jobs report, the rise in wages and the drop in unemployment has fueled fears of an overheating economy, analysts at broker IG said in a note.
In Europe, the Stoxx 600 fell 0.05% in early trade, weighed down by a decline in Atos stock after the French consulting company issued a profit warning.
In Asia overnight, shares traded broadly higher as investors took heart from a rebound in Hong Kong tech, and on the back of expectations for reform from the Chinese markets regulator. The index rose 0.9%.
After a week of losses, the criptocurrency complex found some stability Monday. ether rose 1.2% to $3,167, while bitcoin gained 0.8% to trade around $42,095, still around its lowest since late September. Solana and polkadot gained 2% and 3%, respectively.
Business Insider has an original article.
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