Stocks Rally as Dollar Posts Best Week This Year: Markets Wrap

(Bloomberg) -- U.S. stocks climbed to records as the latest jobs report bolstered optimism in the world’s largest economy, continuing equity rallies that took hold in Asia and Europe. The dollar posted its best week this year.

The S&P 500 Index and Dow Jones Industrial Average closed at all-time highs in light volume after data showed hiring increased by more than forecast in November and the unemployment rate held at a 17-year low. The dollar briefly edged lower as investors assessed tepid wage growth that missed estimates, then resumed its fifth consecutive gain. Ten-year Treasury yields inched higher.

The jobs data add to a run of recent news that bolstered investor optimism after the U.S. government averted a shutdown and tax reform negotiations made progress. The positive stock moves are a welcome reversal for many investors, who earlier in the week booked profits amid an equity rotation and waning risk sentiment. Looking ahead to next week, traders see an interest-rate increase by the Federal Reserve as pretty much a given.

“The headline number was a very strong number,” said Eric Stein, the co-director of global income and a portfolio manager at Eaton Vance in Boston. “The one negative was on the wage side. It literally changes nothing for next week -- they’re going to hike.”

The pound reversed initial gains as the U.K. and the European Union struck a deal to unlock divorce negotiations, while equities in Europe jumped. Bank shares soared after emerging relatively unscathed from the final batch of Basel III post-crisis capital rules. In Asia, stocks made strong gains after Chinese trade data exceeded analyst estimates and Japan’s economic growth figures were revised higher. Emerging-market stocks rallied. 

Meanwhile, oil rose above $57 a barrel in the second day of gains. Gold edged lower for a fifth day.

Terminal customers can read more in our Markets Live blog.

Here are some of the key events for the rest of Friday and next week:

• Fed policy makers are projected to raise the target range for their benchmark interest rate next week against a backdrop of continuing robust U.S. economic conditions, a vibrant labor market and forecasts inflation will begin to pick up.
• The European Central Bank, the Bank of England and the Swiss National Bank, among others, also set monetary policy.
• Among top U.S. economic reports next week are consumer inflation and retail sales for December.
• European lawmakers continue to debate Brexit and weigh moves on the next step, while North America Free Trade Agreement (NAFTA) negotiators meet again.

And these are the main moves in markets:

Stocks

• The S&P 500 rose 0.6 percent as of the close of trading in New York.
• The Stoxx Europe 600 Index climbed 0.7 percent to a one-month high.
• The U.K.’s FTSE 100 Index gained 1 percent.
• Japan’s Nikkei 225 Stock Average climbed 1.4 percent to the highest in a week.
• The MSCI Emerging Market Index jumped 1 percent.

Currencies

• The Bloomberg Dollar Spot Index gained 0.2 percent.
• The euro slipped 0.1 percent to $1.1765.
• The British pound fell 0.6 percent to $1.339.
• The Japanese yen decreased 0.3 percent to 113.47 per dollar.

Bonds

• The yield on 10-year Treasuries rose one basis point to 2.38 percent.
• Germany’s 10-year yield rose one basis points to 0.3 percent.
• Britain’s 10-year yield climbed three basis points to 1.28 percent.

Commodities

• West Texas Intermediate crude rose 1.2 percent to $57.35 a barrel.
• Gold slumped 0.2 percent to $1,250.10 an ounce.
• Copper gained 0.4 percent to $2.977 a pound.

--With assistance from Netty Ismail Chikako Mogi Adam Haigh Samuel Potter and Cormac Mullen

To contact the reporters on this story: Brendan Walsh in Austin at bwalsh8@bloomberg.net, Sarah Ponczek in New York at sponczek2@bloomberg.net.

To contact the editor responsible for this story: Jeremy Herron at jherron8@bloomberg.net.

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