Global stock markets moved higher at the end of the week, heading for their strongest weekly performance in around two months. The main driver came from weaker-than-expected U.S. jobs data, which eased investor concerns over the possibility of an imminent interest rate hike by the Federal Reserve.

Global Stocks Move Higher

In Europe, the STOXX 600 continued to hit a fresh record high, rising around 0.6% during the session and heading for a weekly gain of 2.6%. This marked its strongest weekly performance since mid-May.

The MSCI global equity index also rose 0.4%, bringing its weekly gain to around 2%. Capital has been rotating into markets outside the United States, particularly Europe, where stock valuations are seen as more attractive and less dependent on the technology and AI sectors compared with the U.S. market.

Tech Stocks Pull Back as Defensive Sectors Gain Attention

During the week, semiconductor stocks and AI-related names on Wall Street came under pressure as investors shifted toward other sectors, including financials and healthcare.

However, by Friday, chip stocks in Asia had rebounded. South Korea’s KOSPI jumped around 6%, while Japan’s Nikkei gained 1.5%.

Meanwhile, PMI data from major Asian economies showed that economic activity remained relatively healthy. Japan’s services sector returned to expansion, while China’s services activity continued to grow, although at a slightly slower pace.

U.S. Jobs Data Cools Rate Hike Expectations

The latest U.S. jobs report showed that job growth slowed sharply in June. In addition, payroll figures for the previous two months were revised lower.

This reinforced the view that the U.S. labor market is cooling. As a result, expectations for a near-term Fed rate hike weakened.

According to CME’s FedWatch tool, the probability that the Fed will keep interest rates unchanged at its September meeting rose to 46.8%, up from 35.8% a day earlier.

Gold Gains as the Dollar Pauses

Reduced expectations of a more aggressive Fed helped lift gold prices by around 1%, pushing the metal above $4,160 per ounce. Gold was also on track for its first weekly gain since the end of May, rising around 1.8% for the week.

The U.S. dollar also paused after climbing to its highest level in more than a year against a basket of major currencies. The euro edged higher to $1.144, while the British pound remained steady around $1.335.

Against the Japanese yen, the dollar traded near 161 yen after the yen fell to its weakest level in 40 years. Markets continued to watch for any potential intervention from Japanese authorities.

Inflation Risks Have Not Disappeared

Although weaker labor market data helped reduce pressure for a near-term rate hike, inflation risks remain in the background. One key concern is global shipping costs.

Disruptions in the Strait of Hormuz have forced many ships to reroute, reducing global shipping capacity. This could continue to add pressure to commodity prices and input costs in the coming period.

In the energy market, Brent crude oil futures rose 0.45% to $71.12 per barrel.

Conclusion

Global markets are responding positively to signs that the U.S. labor market is cooling. This has eased concerns over an imminent Fed rate hike, supporting equities and gold while causing the U.S. dollar to pause.

However, the market outlook is not entirely risk-free. Inflationary pressure from shipping costs, geopolitical uncertainty, and currency volatility in Asia remain key factors investors should continue to monitor.

Source: Reuters