ISTANBUL
Global markets saw an optimistic trend as US nonfarm payrolls came in below estimates, reducing the possibility of a Fed rate hike, but selloffs in technology stocks limited risk appetite.
US nonfarm payrolls rose 57,000 in June, well below estimates. Employment continued to rise in professional and business services, social assistance and healthcare, while the leisure and hospitality sectors saw losses.
The June figure followed the downwardly revised nonfarm payroll increase of 148,000 in April and the downwardly revised rise of 129,000 in May.
The US unemployment rate fell to 4.2% in June, below the market estimate of 4.3%, the same level as in May.
The hiring spree that came to the fore ahead of the FIFA World Cup led to a decline in nonfarm payrolls. While the increase was below estimates, it supported expectations that the Fed could be more flexible in its monetary policy path in the coming period.
The labor force participation rate also played a role in the falling unemployment rate, as the recent drop carried the risk of reversing in the coming months and pushing unemployment back up.
The Fed was widely expected to hike rates in October before the jobs report was released, while the likelihood of an October rate hike stood at 82%, according to money market estimates.
The likelihood of a September hike fell from 67% to 63%, led by optimism over geopolitical developments.
Regarding US-Iran developments, President Donald Trump said Tehran accepted almost everything Washington wants in an interview with CNBC.
Iranian Foreign Minister Abbas Araghchi said lasting peace in the region can only be achieved through a comprehensive and inclusive approach without any external intervention.
Qatar announced that the indirect talks between the US and Iran showed positive progress.
At the same time, all eyes turned to statements by Fed officials.
San Francisco Fed President Mary Daly said monetary policy remains slightly restrictive, which is expected to slow inflation, but uncertainties over the economic outlook persist.
In light of these developments, the US 10-year Treasury yield fell to 4.45%, the US Dollar Index fell 0.2% to 100.8 as the likelihood of a Fed rate hike diminished, gold rose 1.3% to $4,176 per ounce, and Brent crude oil was trading up 0.9% at $72.3 per barrel on Friday.
The New York Stock Exchange closed mixed Thursday due to weakness in technology stocks despite waning rate hike expectations.
Semiconductor makers led the selloff as shares of chipmakers Nvidia and Micron Technology dropped 1.39% and 5.49%, respectively.
US electric vehicle (EV) maker Tesla’s shares fell 7.49% despite the company delivering 480,126 units in the second quarter of the year, above estimates.
The Dow Jones climbed 1.14%, while the S&P 500 was flat and the Nasdaq fell 0.8% on Thursday. US markets opened higher on Friday, while they will be closed on Saturday due to Independence Day.
Meanwhile, European stock markets traded positively as buying in the automotive, personal care, healthcare, food and beverage, defense and pharmaceutical sectors accelerated.
Strong earnings from European firms and the resulting optimism over year-end earnings estimates boosted risk appetite.
The German coalition government’s new reform package contributed to the optimism, as it aims to provide annual tax exemptions totaling €10 billion (about $11.4 billion) for low- and middle-income citizens.
At the same time, the eurozone’s unemployment rate fell to 6.2% in May from 6.3% in April.
The UK’s FTSE 100 gained 1.67%, Italy’s FTSE MIB 30 rose 1.6%, France’s CAC 40 gained 1.65%, and Germany’s DAX 40 rose 2.16% on Thursday. European indexes opened higher on Friday.
Asian stock markets also showed a positive trend near the close on Friday.
Japan’s services Purchasing Managers’ Index (PMI) for June stood at 52.2, while China’s figure came in at 54.1.
Data in the region painted an optimistic picture for economic growth, and oil prices falling to pre-war levels supported risk appetite.
Near the close, Japan’s Nikkei 225 rose 1.2%, South Korea’s Kospi Index 4.7%, China’s Shanghai Composite Index 0.7%, and Hong Kong’s Hang Seng Index 1.6%.
