U.S. jobs data, dovish Fed comments boost equities

NEW YORK (Reuters) – Equities around the globe rallied on Friday while bond yields rose after sharply declining earlier in the week as U.S. employment data pointed to economic strength and Federal Reserve Chair Jerome Powell said the U.S. central bank would be patient with its monetary policy.

U.S. and European stocks got a boost as stronger-than-expected U.S. employment data soothed some concerns of slowing economic growth. That was welcome news to investors after sharp declines on Thursday following Apple Inc’s (AAPL.O) cut in its revenue forecast.

Stocks surged further, with Wall Street up more than 3 percent, after Federal Reserve Chair Jerome Powell spoke at a meeting of the American Economic Association. He said Fed policymakers were paying attention to market activity and would be flexible in deciding future interest-rate hikes and reducing the Fed’s balance sheet. He also said that he would not resign if asked to do so by U.S. President Donald Trump.

Powell’s comments alleviated some worries that the Fed’s course of monetary tightening may be too aggressive in the event of an economic slowdown, Friday’s stronger-than-expected U.S. jobs report notwithstanding.

“He’s saying the right things: that the Fed is prepared to shift, that it’s listening carefully, that it’s sensitive to the messages the market is sending,” said James Athey, senior investment manager at Aberdeen Standard Investments in London.

“But he underscored that the Fed is engaging in tightening policy because the economy is doing well. It’s a good message for the market that is starting to consume itself out of fear.”

Earlier, stock markets in Asia and Europe were buoyed by news that China and the United States will hold trade talks in Beijing on Monday and Tuesday.

Keeping with Friday’s risk-on theme, oil prices rose in tandem with equities. Brent crude LCOc1 futures rose $1.36 to $57.31 a barrel, a 2.4 percent gain. U.S. crude CLc1 futures rose $1.08 to $48.17 a barrel, a 2.3 percent gain.

Conversely, safe-haven assets that had climbed this week as equity markets were roiled came down substantially. Treasury yields rose sharply, and the dollar gained 0.8 percent against the yen. Spot gold prices, which reached a six-month peak on Thursday, dropped 0.7 percent.

Powell’s dovish comments pushed down the dollar index .DXY, which gave up earlier gains to slip 0.2 percent. The euro EUR= edged up 0.1 percent.

In U.S. equities, the Dow Jones Industrial Average .DJI rose 770.1 points, or 3.39 percent, to 23,456.32, the S&P 500 .SPX gained 84.18 points, or 3.44 percent, to 2,532.07 and the Nasdaq Composite .IXIC added 288.31 points, or 4.46 percent, to 6,751.81.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 27, 2018. REUTERS/Eduardo Munoz

The pan-European STOXX 600 index jumped 2.83 percent, its biggest daily gain since June 2016.

MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 2.52 percent.

Benchmark 10-year Treasury notes US10YT=RR last fell 32/32 in price to yield 2.6659 percent, from 2.553 percent late on Thursday.

Reporting by April Joyner; Additional reporting by Virginia Furness, Swati Pande, Wayne Cole and Chuck Mikolajczak; editing by Jon Boyle, Larry King and Dan Grebler

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