Stock markets diverge as Wall Street pins hopes on pause in interest rate rise

US employers added 187,000 jobs in August, but underlying numbers point to expectations that the Fed could be finishing with raising rates

People are seen on a pedestrian bridge with a screen showing stock exchange data in Shanghai. Markets in China received a boost on Friday after government measures to support the yuan and real estate Show more

Stock markets ended mixed on Friday, with Wall Street barely budging at the closing bell as a cooling US labour market supported investor hopes that the Federal Reserve will again pause raising interest rates.

US employers added 187,000 jobs in August, after projections of 170,000 by data firm FactSet, but underlying numbers point to expectations that the US central bank could be finished with interest rate rises.

While the headline employment figure showed a resilient labour market, Friday's report showed signs of softening at a steady pace.

The unemployment rate rose from 3.5 per cent to 3.8 per cent, which is still historically low. Wage growth rose 0.2 per cent month-on-month, its lowest gain since last year.

This is positive news for the Fed, which, after holding off on its tightening cycle in June, increased its policy for the 11th time since March 2022, as it aims to bring inflation down to its 2 per cent target range after prices hit a four-decade high in June 2022.

"To be clear, the Fed won't get carried away with [Friday's jobs] report. It's just one that needs to be repeated on a number of occasions but there's plenty of cause for optimism in there," Craig Erlam, a senior market analyst at Oanda, wrote in a note to clients.

"If there was any doubt that the Fed will pause in September, today's report surely puts an end to that debate."

At the close of trading on Friday, the S&P 500 settled 0.2 per cent higher, while the Dow Jones Industrial Average was up 0.3 per cent. The tech-heavy Nasdaq Composite shed 0.1 per cent, snapping a five-day winning run.

In Europe, London's blue-chip FTSE 100 ended 0.3 per cent higher to post a second week of gains in a row, driven by energy, mining and chemical stocks, which gained 1.8 per cent, 1.7 per cent and 2.5 per cent, respectively.

Frankfurt's DAX and Paris' CAC 40, however, declined 0.7 per cent and 0.3 per cent respectively, as the prospect of Chinese carmakers seeking to gain a foothold in the European market dented auto stocks.

Carmakers from the world's second-largest economy, which in particular are heavily marketing their home-grown electric vehicles, are expected to have a major presence at next week's Munich auto show.

Earlier in Asia, equities finished higher before the release of the US jobs data, with Tokyo's Nikkei 225 rising 0.3 per cent and the Shanghai Composite adding 0.4 per cent.

Markets in China received a boost after the central bank acted to support the yuan by cutting the amount of foreign cash lenders must keep in their reserves.

The government also unveiled new measures for the property sector, allowing cities to cut down on payments for home buyers and convince banks to lower their mortgage rates.

This was an apparent response to a Wednesday warning from Country Garden, China's largest private property developer, which said it risked a default if its financial performance continues to deteriorate following a record loss in the first half of 2023.

Hong Kong's Hang Seng Index was closed as Typhoon Saola hit.

In commodities, oil prices hit multi-month highs to snap a two-week losing run amid expectations of further supply cuts by Opec+ members.

Brent rose 1.98 per cent, or $1.72, to settle at $88.55 a barrel. It hit a session high of $88.75, its highest since January. West Texas Intermediate jumped 2.3 per cent, or 1.92, to close at $85.55 a barrel. It rose to as much as $85.81, its best level since November.

Gold, meanwhile, eked out a less than 0.1 per cent gain, or $1.20, to settle at $1,967.10 an ounce, paring initial gains but was still enough for a weekly advance.