The Japan Times - Wall Street up despite US jobs data dashing early rate cut hopes

The Fed signalled last month it sees itself beginning to cut interest rates in 2024, which helped stock markets finish the year on a strong note.

But the minutes from its policy meeting last month, released earlier this week, showed they were in no hurry and expected to keep borrowing costs at a two-decade high for some time as they want to make sure they have inflation under control.

That put added importance on the December non-farm payroll data. The tight labour market and wage growth has been seen as posing a threat to the Fed's goal of bringing inflation down to its two percent target. It currently stands at 3.3 percent.

The data showed US job growth surged in December to 216,000 jobs in the final month of 2023, confounding expectations of a slowdown from November.

"The key takeaway from the report is that it wasn't weak, so the market is going to have to grapple with the notion that the Fed may not cut rates as many times in 2024 as the market had come to expect at the end of 2023," said market analyst Patrick O'Hare at Briefing.com.

The stocks rally in the final months of the year came as investors hoped that the Fed could begin cutting rates as soon as in the coming months and more than policymakers had indicated in their forecasts.

Equities have slid in recent days as worries mounted that the rally and rate-cut expectations may have gone too far.

Wall Street stocks held steady at the open of trading and then edged higher.

Europe's leading markets were down in afternoon trading, with data showing eurozone inflation turning higher again last month also raising questions about the timing of interest rate cuts from the European Central Bank.

Callie Cox at eToro said it was normal for markets to do a "heat check" after a rally like the one experienced at the end of last year.

But "it'd be hard to get too bearish without a significant breakdown in the job market," she said. "We're clearly not seeing that in any jobs-related data yet."

Market analyst Craig Erlam at OANDA said that while jobs data and Fed minutes may not have supported the narrative of early interest rate cuts, the broader trend of a gradually slowing labour market and soft landing of the US economy holds.

He noted that the US dollar spiked on the release of the data but quickly pulled back, while stocks moved higher although equity futures had been lower.

"None of this suggests traders are suddenly worried."

Meanwhile, shares in French spirits makers tumbled after Chinese authorities launched an anti-dumping probe into brandy imported from the European Union.

China imported more brandy than any other spirit in 2022, with most of it coming from France, according to a report by research group Daxue Consulting.

Shares in Remy Cointreau, which sells cognac and brandy, fell over 10 percent in afternoon trading. Shares in Pernod Ricard, maker of Martell cognac, dropped nearly 5 percent. Luxury group LVMH, maker of Hennessy cognac, were down 2.2 percent.

- Key figures around 1430 GMT -

New York - Dow: UP less than 0.1 percent at 37,458.63 points

New York - S&P 500: UP 0.2 percent at 4,699.20

New York - Nasdaq: UP 0.2 percent at 14,544.92

London - FTSE 100: DOWN 0.6 percent at 7,676.97

Paris - CAC 40: DOWN 0.8 percent at 7,390.19

Frankfurt - DAX: DOWN 0.5 percent at 16,532.00

EURO STOXX 50: DOWN 0.6 percent at 4,446.89

Tokyo - Nikkei 225: UP 0.3 percent at 33,377.42 (close)

Hong Kong - Hang Seng Index: DOWN 0.7 percent at 16,535.33 (close)

Shanghai - Composite: DOWN 0.9 percent at 2,929.18 (close)

Euro/dollar: DOWN at $1.0946 from $1.0952 on Thursday

Dollar/yen: UP at 145.06 yen from 144.61 yen

Pound/dollar: UP at $1.2689 from $1.2682

Euro/pound: DOWN at 86.26 pence from 86.32 pence

West Texas Intermediate: UP 2.1 percent at $73.71 per barrel

Brent North Sea Crude: UP 1.6 percent at $78.80 per barrel

burs/rl/jm

K.Inoue--JT