NEW YORK (Reuters) - The S&P 500 posted a nominal gain and Treasury yields edged lower on Friday, as remarks from Federal Reserve chief Jerome Powell firmed interest rate cut expectations and China announced an economic stimulus package, both of which helped offset weaker-than-expected U.S. jobs data.
The roller-coaster week began with a flight to safety driven by trade jitters and weak U.S. manufacturing data, but positive geopolitical developments in Britain, Hong Kong and Italy, along with news that U.S.-China trade talks would continue, revived market risk appetite.
That appetite was further stoked after China’s central bank said it would lower the amount of cash that banks must hold as reserves, in order to bolster the nation’s weakening economy.
“Over the week we’ve seen risk assets rebound as favourable economic data and positive geopolitical developments provided comfort to investors that a broad slowdown isn’t about to take shape,” said Charlie Ripley, senior market strategist for Allianz Investment Management in Minneapolis.
But optimism was dampened by the U.S. non-farm payrolls report, which showed an increase of 130,000 jobs in August, fewer than analysts expected.
The underwhelming data provided another possible sign that the longest-ever period of U.S. economic expansion is losing steam and increased the likelihood that the Fed will cut rates when it meets later this month.
But Ripley believes the jobs report was not as downbeat as the headline number suggested.
“We still have an unemployment rate at 3.7% and wages are increasing at a decent clip,” Ripley said.
“Beyond that we had favourable comments from Powell, which helped alleviate investor concern.”
Indeed, in remarks made at a panel discussion in Zurich, Powell called the jobs report consistent with a strong labour market, adding that despite trade uncertainties he does not foresee or expect a U.S. recession.
The Dow Jones Industrial Average .DJI rose 69.31 points, or 0.26%, to 26,797.46, the S&P 500 .SPX gained 2.71 points, or 0.09%, to 2,978.71 and the Nasdaq Composite .IXIC dropped 13.75 points, or 0.17%, to 8,103.07.
European and emerging markets extended their gains as China’s stimulus announcement outweighed the disappointing economic data from the United States and also from Germany.
The pan-European STOXX 600 index rose 0.32% and MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.20%.
Emerging market stocks rose 0.51%. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.65% higher, while Japan's Nikkei .N225 rose 0.54%.
U.S. Treasury yields edged lower following Powell’s even-keel message, which cemented expectations that the Fed would cut interest rates later this month.
Benchmark 10-year notes US10YT=RR last rose 4/32 in price to yield 1.5517%, from 1.565% late on Thursday.
The 30-year bond US30YT=RR last rose 28/32 in price to yield 2.0169%, from 2.054% late on Thursday.
The dollar was essentially flat against a basket of major world currencies after the jobs report reinforced the likelihood of further rate cuts from the Fed.
The dollar index .DXY rose 0.01%, with the euro EUR= down 0.05% to $1.1027.
The Japanese yen strengthened 0.02% versus the greenback at 106.94 per dollar, while sterling GBP= was last trading at $1.2294, down 0.28% on the day.
Oil prices rose after Powell said the Fed would “act as appropriate” to sustain an economic expansion that has been hindered by global trade uncertainties.
U.S. crude oil futures settled at $56.52 per barrel, up 0.39%, while Brent crude oil futures settled up 0.97% at $61.54 per barrel.
Gold dipped nearly 1% after Powell’s remarks helped jump-start risk appetite after the underwhelming jobs data.
Spot gold XAU= dropped 0.9% to $1,505.51 an ounce.
Copper CMCU3 lost 0.29% to $5,828.00 a tonne.
Three-month aluminium on the London Metal Exchange CMAL3 lost 0.06% to $1,783.00 a tonne.
Reporting by Stephen Culp; editing by Jonathan Oatis