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Strong US jobs figures bolster Wall Street

Wednesday 15:25 BST

What you need to know
● S&P 500 rallies sharply after robust jobs report from ADP
● Energy stocks lead way as oil prices hit one-month peak
● Treasury yields and dollar nudge higher
● Gold drops below $1,250, while sterling rises on strong services survey
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Hot topic

Markets are trading with a bullish bias as the health of the world’s biggest economy, the prospect for global benchmark borrowing costs and the US relationship with China dominate investor thinking.

On Wall Street, the S&P 500 is up 0.7 per cent to 2,376 in mid-morning New York trade.

The dollar index, which measures the buck against a basket of its peers, is up 0.1 per cent to 100.65, and the benchmark 10-year Treasury yield, which move opposite to the bond price, is 2 basis points higher at 2.37 per cent.

A survey of US private sector job hiring published by ADP on Wednesday showed a net 263,000 positions were added in March. That boosted, S&P futures, the buck and bond yields, but those moves have been pared as traders also noted that February’s numbers were revised down from 298,000 to 245,000.

News that the Institute for Supply Management’s non-manufacturing index had fallen to 55.2 in March, from 57.6, had little initial impact.

Participants will now be keeping a close eye on number of forthcoming “risk events”.

Investors will be keen to see if the health of the labour market dovetails with the Federal Reserve’s thinking when the central bank publishes at 19:00 BST the minutes of its latest meeting. The official non-farm payrolls report will be released on Friday.

Sandwiched between the Fed minutes and NFP report is the start on Thursday in Florida of an eagerly-anticipated summit between the presidents of the US and China.

The relationship between the world’s two biggest economies is quite tense as the Trump administration complains about China’s large trade surplus and Washington makes clear its frustration at Beijing’s alleged unwillingness to tackle continued provocations by North Korea.

Investors are wary that if the Trump-Xi summit is seen to have not gone well then it would make it more difficult to reach agreement on North Korea, while any lingering trade friction could damage corporate profits.

Equities

Still, mainland China’s equities shrugged off such concerns. The Shanghai Composite, returning to action after taking the first two days of the week off, rose 1.5 per cent as traders were energised by news that Beijing would launch a big new economic zone in Hebei province, sending related shares surging.

European bourses — already firm — got an additional lift from Wall Street’s gains. The Stoxx 600 is up 0.4 per cent, while London’s FTSE 100 is gaining 0.5 per cent as energy groups rally and miners welcome a rise in copper prices.

Hong Kong’s Hang Seng added 0.6 per cent, Japan’s Topix was flat, while in Australia the S&P/ASX 200 was up 0.3 per cent on solid gains for the materials and energy sectors.

South Korea’s Kospi Composite recovered early losses that came in the wake of North Korea firing another missile into the Sea of Japan on Wednesday morning, the index finishing barely changed on the session.

Forex

The South Korean won also took a stoic stance, weakening just 0.2 per cent versus the US dollar to Won1,126.53.

Indeed, moves across most major currency pairings are fairly muted as traders keep their powder dry. The euro is down just 0.1 per cent to $1.0663 as investors assess France’s second presidential debate.

Early polls suggested far-left leader Jean-Luc Mélenchon won the debate, with centrist Emmanuel Macron ranking second and far-right leader Marine Le Pen trailing.

However, the Japanese yen, which last week took advantage of investor angst to brush a four-month “high” of ¥110 per dollar, is feeling the force of the better US jobs figures, weakening by 0.4 per cent to ¥111.18.

The South African rand is having a volatile day, initially strengthening by about 1 per cent per greenback as worries faded about the government’s economic policies, but since relapsing to trade 0.9 per cent softer at 13.74.

Fixed income

Government bond markets are keeping an eye on a flurry of national service sector surveys released on Wednesday.

The 10-year German Bund yield is 2 basis points firmer at 0.27 per cent after surveys showed the eurozone enjoying its best period of economic activity since the bloc’s debt crisis in 2011. The selling also follows more hawkish comments from Bundesbank chief Jens Weidmann.

Equivalent maturity gilt yields are adding 3bp to 1.10 per cent — and sterling is up 0.4 per cent to $1.2489 — after growth in the UK services sector hit a three-month high.

Commodities

Oil prices continue to advance, having enjoyed a 2 per cent bounce on Tuesday as investors weighed up whether Opec members might extend supply curbs beyond an initially agreed six-month period.

Brent crude, the international benchmark, is up 1.5 per cent to $54.99 a barrel, having earlier hit $55.09 — while West Texas Intermediate, the main US contract, is adding 1.5 per cent to $51.78 ahead of inventory data later in the day.

Gold is slipping 0.6 per cent to $1,248 an ounce as the strong US jobs data is seen increasing the chances of further Fed interest rate rises and thus a firmer greenback.

Additional reporting by Peter Wells in Hong Kong

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