Hopes for stimulus drive risky assets higher despite weak U.S. jobs report

FILE PHOTO: Signage is seen outside the entrance of the London Stock Exchange in London, Britain

Growing prospects for a U.S. coronavirus relief package after a grim employment report helped boost demand for riskier assets on Friday, taking the dollar to a new 2-1/2-year low and pushing oil prices to their highest levels since March when widespread lockdowns aimed at curtailing the pandemic took effect.

U.S. Treasury bonds, meanwhile, dipped in anticipation of increased borrowing to fund economic recovery measures.

The U.S. economy added the fewest workers in six months in November, with nonfarm payrolls increasing by 245,000 jobs last month after rising by 610,000 in October, the Labor Department said on Friday. Economists polled by Reuters had forecast payrolls would increase by 469,000 jobs in November.

“It shows that the economy is still not on firm footing and we need stimulus. The revitalized conversations are important, and this shows that ultimately maybe a bad number will get the politicians to push forward a bit faster,” said Marvin Loh, senior global macro strategist at State Street Global Markets.

A bipartisan, $908 billion coronavirus aid plan gained momentum in the U.S. Congress on Thursday as conservative lawmakers expressed their support.

MSCI’s gauge of stocks across the globe gained 0.30% following mixed trading in Asia and modest gains in Europe.

In morning trading on Wall Street, the Dow Jones Industrial Average rose 76.68 points, or 0.26%, to 30,046.2, the S&P 500 gained 8.13 points, or 0.22%, to 3,674.85 and the Nasdaq Composite added 11.19 points, or 0.09%, to 12,388.38.

The broadly upbeat mood saw the U.S. dollar lose ground to other major currencies.

“One of the elements of the better news we are getting, for instance the vaccine, is to increase the attraction of risky assets, and that reduces the appetite for the U.S. dollar,” said Eric Brard, head of fixed income at asset manager Amundi.

The euro hit its highest since April 2018 against the dollar and was last at $1.2172, a weekly gain of more than 1.5%. The dollar index fell 0.163%, near its lowest since May 2018.

Benchmark U.S. 10-year Treasury notes last fell 12/32 in price to yield 0.9592%, up from 0.921% late on Thursday.

“November’s report is the weakest monthly jobs number of the pandemic rebound, and markets are clearly betting that today’s result will pull forward stimulus talks, necessitating greater supply,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

German industrial orders rose more than expected on the month in October, data showed on Friday, raising hopes the manufacturing sector in Europe’s biggest economy started the fourth quarter on a solid footing during a second wave of the pandemic.

Oil prices got an additional lift after OPEC and Russia agreed to reduce their deep oil output cuts from January by 500,000 barrels per day.

The increase means the Organization of the Petroleum Exporting Countries and Russia, a group known as OPEC+, would move to cut production by 7.2 million barrels per day, or 7% of global demand from January, compared with current cuts of 7.7 million barrels per day.

U.S. crude rose 0.5% to $45.87 per barrel and Brent was at $49.01, up 0.62% on the day.

Spot gold added 0.4% to $1,847.28 an ounce. U.S. gold futures gained 0.03% to $1,837.40 an ounce.

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