Global equity markets surged on Friday as investors set aside any fear of economic softness in a weak US jobs report, but bond yields and the dollar fell as the data showed employers hired far fewer workers than expected in January.
Non-farm payrolls rose by 113,000, well below the consensus of 185,000, although the unemployment rate hit a five-year low of 6.6 percent, the US Labour Department said.
The dollar fell broadly as safe-haven gold and US government debt prices rose on the lacklustre report. But stocks rallied, with investors writing off the weakest two months of US job growth in three years on inclement weather.
For the week, the S&P 500 easily recouped losses from earlier in the week that had pushed the US benchmark down to lows last seen in October. The 2.6 percent surge over Thursday and Friday was the biggest two-day gain in four months.
The household survey from which the jobless rate is derived showed strong gains in employment and an increase in the number of people in the labour force, a reprieve from concerns about a potential soft patch in the economy.
The proportion of working-age Americans with a job rose to 58.8 percent, the highest since October 2012.
“Markets are increasingly behaving as though the recent series of soft economic data is truly attributable to bad weather, and not some broader downturn in demand,” said David Joy, chief market strategist at Ameriprise Financial in Boston.
“It’s unlikely that the economic momentum from late last year simply stalled in December and January,” Joy said.
US gross domestic product grew by the most in a decade in the last half of 2013, the Commerce Department said last week.
MSCI’s all-country stock index rose 1.2 percent, and its gauge of emerging markets rose 0.89 percent.
The pan-European FTSEurofirst 300 index of leading shares closed up 0.75 percent at 1,300.11, helped by steelmaker Arcelor, as investors bet equities would continue to benefit from the region’s gradual economic rebound.
Arcelor rose 0.81 percent to 12.495.
On Wall Street, the Dow Jones industrial average rose 165.55 points, or 1.06 percent, to close at 15,794.08. The S&P 500 gained 23.59 points, or 1.33 percent, to 1,797.02 and the Nasdaq Composite added 68.739 points, or 1.69 percent, to 4,125.861.
For the week, the Dow rose 0.6 percent, the S&P 0.8 percent and the Nasdaq 0.5 percent.
“Expectations for the (unemployment) report were too high, and investors are giving the report the benefit of the doubt because of the weather,” said Donald Selkin, chief market strategist at National Securities in New York.
After the sell-off earlier in the week, the fact that equities rose after Thursday’s gains indicated there is still momentum to the bull market, Selkin said.
“Stocks initially got killed after the report came out, but now we’re pretty sharply higher. That’s a strong sign that we’ve bottomed out,” he said.
Though the labour market report called into question the strength of the economy, the preponderance of most economic data still shows some pretty good growth, said Anthony Valeri, investment strategist at LPL Financial in San Diego.
“We’re seeing earnings on track to grow about 9 percent year-over-year, and as long as that’s the case, the pullback in stocks is likely to be limited,” Valeri said.
“The data hasn’t been weak enough to suggest that the current earnings trajectory will deviate,” he said.
Earnings have been holding up.
Of the 343 companies in the S&P 500 that have reported earnings to date for last year’s fourth quarter, 67.9 percent beat analyst expectations, Thomson Reuters data show. In a typical quarter since 1994, 63 percent beat estimates.
