Stock markets rise on US jobs data, looming eurozone rate cut

A cooling US labor market is raising hopes of a Federal Reserve interest-rate cut (MARIO TAMA)
A cooling US labor market is raising hopes of a Federal Reserve interest-rate cut (MARIO TAMA)

US and European stock markets climbed Wednesday on the eve of an expected European Central Bank interest rate cut, and as US jobs data fueled hopes that the Federal Reserve will soon follow suit.

New York's broad-based S&P 500 and tech-heavy Nasdaq both hit fresh highs, while chip designer Nvidia topped $3 trillion in market capitalization.

This makes Nvidia only the third US company to reach a market value of that level, after Apple and Microsoft. Its shares closed 5.2 percent up.

"You have kind of the best of both worlds for the stock market in that you have lower interest rates and strength in the mega cap stocks, specifically, Nvidia," said Patrick O'Hare of Briefing.com.

US economic data also showed that private sector hiring cooled more than expected in May, with employers adding 152,000 jobs, according to payroll firm ADP.

Investors have been concerned that the US central bank will keep interest rates higher for longer, but a softer labor market could give the Federal Reserve confidence to pivot to cuts more quickly.

"If you have fewer people working, that could imply an increase in the unemployment rate," Sam Stovall, chief investment strategist at financial research firm CFRA, told AFP.

"That would bring down inflation and increase the likelihood that the Fed will be able to start cutting rates later this year," he added. "So, bad is good."

The ADP figures came ahead of closely watched US government employment data due Friday, which will provide a clearer snapshot for the Fed ahead of its policy decision next week.

Kathleen Brooks, research director at trading platform XTB, said "bad economic news" raises the chance of a Fed rate cut in September.

Brooks noted that an economic slowdown is not necessarily gloomy news, as it signals "a soft landing is coming into view."

While the Fed has yet to ease its monetary policy, the Canadian central bank decided Wednesday to slash its own rate to 4.75 percent.

- Rate cut ahead -

In European markets, London, Paris and Frankfurt closed higher, with the ECB forecast to start cutting eurozone borrowing costs from historic highs on Thursday.

The ECB decision "is shaping up to be the main event this week," said Matthew Ryan, head of market strategy at global financial services firm Ebury.

"We think that a first 25-basis-point cut remains essentially guaranteed," he added.

But sticky inflation means the move is unlikely to kickstart a rapidly easing cycle.

"We expect the ECB to maintain its data-dependent approach and await confirmation of the downtrend in inflation before committing to additional cuts," Ryan said.

Asian indices closed lower as optimism of a Fed rate cut was eclipsed by resurfacing fears over the health of the US economy.

Concerns of persistent economic weakness have moved to the fore as a manufacturing index showed Monday that US activity contracted for a second successive month in May.

On Tuesday, official data showed job vacancies slipped to just under 8.1 million in April, 300,000 fewer than a month earlier and well below market expectations.

That suggested a long-running period of high inflation and borrowing costs was taking its toll on the US economy.

- Key figures around 2025 GMT -

New York - Dow Jones: UP 0.3 at 38,807.33 points (close)

New York - S&P 500: UP 1.2 percent at 5,354.03 (close)

New York - Nasdaq: UP 2.0 percent at 17,187.90 (close)

London - FTSE 100: UP 0.2 percent at 8,246.95 (close)

Paris - CAC 40: UP 0.9 percent at 8,006.57 (close)

Frankfurt - DAX: UP 0.9 percent at 18,575.94 (close)

EURO STOXX 50: UP 1.7 percent at 5,035.66 (close)

Tokyo - Nikkei 225: DOWN 0.9 percent at 38,490.17 (close)

Hong Kong - Hang Seng Index: DOWN 0.1 percent at 18,424.96 (close)

Shanghai - Composite: DOWN 0.1 percent at 3,087.56 (close)

Dollar/yen: UP at 156.12 yen from 154.88 yen on Tuesday

Euro/dollar: DOWN at $1.0873 from $1.0883

Pound/dollar: UP at $1.2789 from $1.2772

Euro/pound: DOWN at 85.00 pence from 85.19 pence

West Texas Intermediate: UP 1.1 percent at $74.07 per barrel

Brent North Sea Crude: UP 1.1 percent at $78.41 per barrel

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