LONDON — World shares climbed the most in more than a month on Monday and the dollar slipped, after weaker-than-expected US jobs figures gave investors another excuse to push back Federal Reserve interest rate rise expectations.
European shares touched a four-month high led by mining and oil firms as crude prices jumped more than 3% for the second consecutive session in the commodity markets.
Benchmark bonds were also back in favour amid the waning Fed bets, while emerging-market stocks headed for their best day since early July as the Fed and surging oil combination saw them soar 1.3%.
“We don’t expect the Fed to do anything until next year so that lays the ground for further advances,” said TD Securities strategist Paul Fage.
Although the Fed reaction and oil price surge were the markets’ main drivers, they were not the only factors in play.
The yen added to the dollar’s pressures as the head of the Bank of Japan (BoJ) disappointed investors who had expected clearer signals that Tokyo’s monetary policy would be eased further in September.
Although Haruhiko Kuroda signalled its already huge stimulus programme would continue, there was nothing explicit enough to suggest an expansion is imminent.
The dollar dropped 0.7% to ¥103.27 having gained more than 4% against the Japanese currency in the last six days. The euro nudged up 0.2%.
UBS’s head of currency strategy, Constantin Bolz, said the factors that had driven the dollar higher — the growing expectation of a Fed hike in September, bets on imminent further BoJ easing and increased risk appetite — had faded somewhat, but that a fall-back was not surprising given the rapidity of the move.
“We shouldn’t forget that we were at ¥100 10 days ago,” Bolz said.
Britain’s sterling also did damage to the dollar. It hit a one-month high of $1.3360 against the greenback as data showed the UK services industry bounced back strongly from a seven-year low hit after the vote to leave the EU.
The Markit/CIPS purchasing managers index (PMI) jumped to 52.9 in August from July’s 47.4. It was the biggest one-month gain in the survey’s 20-year history and one that beat all forecasts in a Reuters poll.
“It remains too early to say whether August’s upturn is a dead-cat bounce or the start of a sustained post-shock recovery,” IHS Markit economist Chris Williamson said.
“But there’s plenty of anecdotal evidence to indicate that the initial shock of the June vote has begun to dissipate.”
The sharp rise in oil prices came amid renewed speculation that major producers including Saudi Arabia and Russia could co-operate to tackle weak prices and rein in oversupply.
Brent crude futures for November delivery were last up $1.93 a barrel at $48.75 a barrel at 9.45am GMT and US crude for October delivery was up $1.60 a barrel at a session high of $46 a barrel.
Saudi energy minister Khalid al-Falih will make a “significant announcement” at a news conference at the Group of 20 (G-20) summit currently being held in Hangzhou, China.
This comes after Saudi deputy crown prince told Russian President Vladimir Putin on the sidelines of the same summit that co-operation between the two countries would bring benefit to the global oil market.
“Verbal intervention was again needed to trigger a recovery towards $50,” senior ABN Amro economist Hans van Cleef said.
In Asia overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan ended up 1.6%, while Japan’s Nikkei rose 0.7% to its highest close since May 31.
Friday’s US jobs report showed nonfarm payrolls rose by 151,000 jobs in August after an upwardly revised 275,000 increase in July. Economists polled by Reuters had expected a rise of 180,000.
US Fed Funds futures prices indicated investors were now pricing in around a 20% chance of a September hike down from more than 30% before the jobs data. It remains at more than 60% by the end of year.
“What matters is not whether the markets think that was a strong jobs number, but whether Fed policy makers do,” said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities in Tokyo.
Richmond Federal Reserve Bank president Jeffrey Lacker said on Friday that the US economy appears strong enough to warrant significantly higher interest rates.