(Re-file to change third bullet to “fall” from “win”)
Written by Dara Ranasinghe
LONDON (Reuters) – Wall Street shares rose on Friday after data showed U.S. job growth slowed to a healthy pace in June.
The US Dollar Index rose 0.3%, rose by about 0.11% before retreating to trade at a flat level, and the index rose by 0.3%.
The pound and British stocks also rose after Britain’s Labour Party won a landslide victory in the general election after 14 years of Conservative rule.
Market focus in Europe quickly shifted from the British election – where Thursday’s vote result was widely expected – to the second round of legislative elections in France on Sunday.
French stocks rebounded after a sharp sell-off following last month’s surprise election announcement, while the euro also benefited from renewed speculation of a U.S. interest rate cut.
Trading settled a day after the U.S. Fourth of July holiday and the release of the U.S. nonfarm payrolls report for June.
U.S. job growth slowed to a healthy pace in June, with the unemployment rate rising to 4.1%, raising the chances that the Federal Reserve can tame inflation without tipping the economy into recession.
“We are in the perfect summer holiday period for markets, with investors focused on inflation falling back to target in major economies,” said Jay Miller, chief market strategist at Zurich Insurance Group.
The MSCI World Index hit an all-time high and has held near that level, up 0.05% in recent trading. European stocks rose 0.3%, while broader stocks also hit record highs.
Following the UK election results, the London Stock Exchange rose 0.38% at the open. The yield on 10-year British government bonds fell 4 basis points to 4.16%, largely in line with other European markets, and the pound rose to around $1.2797.
“This landslide win provides the kind of clarity and stability that equity markets need in an increasingly volatile world,” said Ben Ritchie, head of developed markets equities at Aberdeen.
Kevin Gardiner, global investment strategist at Rothschild & Co, said the important stuff would unfold more slowly as it became clear how Prime Minister Starmer would pay the price for the faster growth he seeks.
“Even a centrist Labour government will not be as pro-business or liberal as a Conservative government, and we should expect many changes to the details of tax and sectoral policies in the coming weeks, some of which will be controversial,” Gardiner said.
Jobs in focus
The U.S. Labor Department said in its closely watched employment report on Friday that nonfarm payrolls increased by 206,000 jobs last month. Data for May was revised sharply to show 218,000 jobs added instead of the previously reported 272,000.
Zurich’s Miller pointed to weakness in recent employment data and said weaker-than-expected jobs numbers would bolster the case for a U.S. interest rate cut in September.
US Treasury yields were little changed in London trading, with the two-year note trading at around 4.64%, while the benchmark 10-year note yield rose slightly to 4.32%.
In currency markets, the euro rose to $1.0828 after opinion polls indicated that France’s far-right National Party would fail to secure an absolute majority in Sunday’s parliamentary election runoff.
“If the polls ultimately prove accurate, it means that more extreme policies of fiscal expansion and immigration restrictions are unlikely to pass,” said Michael Wan, an analyst at Mitsubishi UFJ Bank.
The dollar fell to around 160.93 yen. The Australian dollar hovered near a six-month high of $0.6739 as yield differentials swung in its favour, supported by bets that the next move in interest rates could be higher as inflation persists.
The cryptocurrency was set to post its biggest weekly drop in more than a year on concerns about a potential dumping of tokens from the collapsed Japanese exchange Mt. Gox and further selling by leveraged players after the cryptocurrency’s strong performance.
It fell 8% on the day to $53,523, its lowest level since late February.
Gold rose 0.8 percent to $2,374.80 an ounce and was on track for a second straight weekly gain, while oil prices were set for a fourth straight weekly gain.
August futures rose 9 cents to $87.52 a barrel, while U.S. West Texas Intermediate crude rose 11 cents to $83.98.
