US stocks and Treasury yields rose on Friday, after fresh data pointed to unexpected strength in the labour market, boosting chances the Federal Reserve will continue to raise interest rates.
Wall Street’s benchmark S&P 500 rose 0.9 per cent per cent while the tech-heavy Nasdaq Composite added 0.6 per cent at the New York open.
The moves come as closely watched data from the US labour department showed that non-farm payrolls rose 339,000 in May, well above the 190,000 consensus estimate of economists polled by Reuters.
The figure signalled resilience in the US economy, making it more likely that the Fed will continue to increase interest rates in efforts to bring down inflation.
Markets priced in a 45 per cent chance of an interest rate increase in June, up from about 25 per cent on Thursday. The likelihood of an increase by July was almost fully priced in.
“The numbers today are likely only going to add fuel to the fire that the Federal Reserve has to raise rates once again, despite earlier this year appearing to be ready to press pause on the hikes,” said Marcus Brookes, chief investment officer at Quilter Investors.
The yield on the US two-year Treasury, which is more sensitive to monetary policy expectations, was up 0.1 percentage points at 4.45 per cent after the release of the report. The yield on the 10-year was up 0.05 percentage points at 3.66 per cent. Bond yields rise as prices fall.
Meanwhile, investors took heart as the US Senate on Thursday approved a deal between the White House and congressional Republicans to lift the country’s $31.4tn debt ceiling for two years in exchange for cuts to government spending.
The accord ended a weeks-long political stand-off that risked triggering an unprecedented debt default in the world’s largest economy. The benchmark S&P 500 hit a nine-month high overnight.
“We can start moving forward with regards to focusing on what else matters . . . What matters is data and fundamentals at the end of the day,” said Georgios Leontaris, chief investment officer for Europe, Middle East and Africa at HSBC Global Private Banking.
The pan-European Stoxx 600 added 1.2 per cent and London’s FTSE 100 added 1.3 per cent. France’s Cac 40 gained 1.6 per cent.
The shares of London-listed Dechra rose 8.3 per cent after the veterinary pharmaceuticals company has agreed a £4.5bn buyout by Sweden’s EQT, in what would be one of the biggest UK private equity deals of the year so far.
Markets in Asia rallied. Hong Kong’s Hang Seng index led the region with a rise of 4 per cent, as internet and tech stocks led a rebound from its lowest point of the year on Thursday.
China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks rose 1.4 per cent. South Korea’s Kospi gained 1.3 per cent and Japan’s Topix was up 1.6 per cent.
A debt ceiling resolution also bolstered oil prices, with West Texas Intermediate, the US marker, adding 2.9 per cent to trade at $72.11 per barrel, while international benchmark Brent crude rose 2.8 per cent to $76.38.
The dollar slipped 0.1 per cent against a basket of six other currencies.