Wall Street bucks global stock market gains after weaker US jobs report

Labour data suggests the Federal Reserve's interest rate rises may lead to a soft landing

Stock price information is seen inside the London Stock Exchange Group's office atrium. The FTSE 100 snapped a three-day losing streak and added 0.5 per cent at the close of trading on Friday, boosted by a 2 per cent gain in energy stocks. BloombergShow less

Global stock markets ended mixed on Friday, with Wall Street erasing gains following a weaker-than-expected US jobs report.

The US economy added about 187,000 jobs in July, which is below the projected 200,000 from analysts – data that suggests the Federal Reserve's interest rate rises may lead to an elusive soft landing, or bringing down inflation without plunging the economy into recession.

It could also lead the US central bank to pause on its actions at its next policy meeting scheduled in September.

Markets and economists were also caught off guard this week when Fitch Ratings stripped the US of its top-tier “AAA” credit rating, citing growing fiscal deficits and an “erosion of governance”.

“Equity markets are under pressure after the US sovereign credit rating downgrade by Fitch soured investment sentiment and the possibility of higher-for-longer interest rates following resilient US job market data keeps weighing on risky assets,” Leonardo Pellandini, an equity strategist at Swiss lender Julius Baer, wrote in a note.

“At the same time, there is a growing sense that the US will manage to avoid a recession and that the US Federal Reserve will be able to deliver a soft landing.”

On Wall Street, the S&P 500 settled 0.5 per cent lower, while the Dow Jones Industrial Average and tech-heavy Nasdaq Composite both ended the week down 0.4 per cent.

It was the fourth straight fall for the S&P, Wall Street's main gauge of health. The Dow, meanwhile, went between gains and losses before settling down.

For the week, the S&P 500 shed 2.3 per cent, the Dow inched down 1.1 per cent and the Nasdaq declined 2.8 per cent. Year-to-date, however, the indices remain strongly positive, having gained 16.6 per cent, 5.8 per cent and 32.9 per cent, respectively.

London's FTSE 100 snapped a three-day losing streak and added 0.5 per cent at the close of trading on Friday, boosted by a 2 per cent gain in energy stocks. However, it posted its first weekly drop in four weeks.

Investors also digested the Bank of England's decision on Thursday to raise interest rates by 0.25 percentage points to 5.25 per cent, taking the cost of borrowing to a 15-year high. It was the 14th consecutive rate increase and was widely expected, with economists forecasting more to come.

“Given the current high level of inflation and rather resilient economy, the Bank of England left the door open for further tightening,” said Janet Mui, head of market analysis at RBC Brewin Dolphin.

“Markets are pricing in almost two more rate increases by the end of the year.”

There is a growing sense that the US will manage to avoid a recession and that the US Federal Reserve will be able to deliver a soft landing

Leonardo Pellandini,
equity strategist at Julius Baer

Elsewhere in Europe, Frankfurt's DAX settled 0.4 per cent higher, while Paris' CAC 40 rose 0.8 per cent at the close.

Earlier in Asia, Tokyo's Nikkei 225 inched up 0.1 per cent, Hong Kong's Hang Seng index added 0.6 per cent and the Shanghai Composite rose 0.2 per cent.

Oil prices bounced back from a midweek dip to record their sixth week of gains in a row on Friday, after leading oil exporters Saudi Arabia and Russia pledged to extend supply cuts to support the market.

Brent rose 1.29 per cent, or $1.10, to settle at $86.24 a barrel, while West Texas Intermediate gained 1.27 per cent, or $1.09, to close at $82 a barrel.

Gold, meanwhile, rose added about 0.4 per cent, or $7.30, to settle at $1,976.10 an ounce and for its biggest weekly decline in six weeks.

The precious metal, a hedge against high inflation, gained on Friday after the US jobs report Treasury yields and the dollar lower.