Stocks at record peak as US data leaves June Fed rate cut bet intact

Stocks hit new peaks on Friday as mixed US jobs data did little to shake markets’ conviction that the Federal Reserve will begin cutting interest rates in June.

Central bankers from the United States and Europe have this week raised expectations that cuts in borrowing costs will begin in the summer on both sides of the Atlantic, pushing stock indices to new highs again on Friday.

Data before the opening bell on Wall Street showed US job growth accelerated in February, but a rise in the unemployment rate and moderation in wage gains kept on the table an anticipated rate cut in June by the Fed.

Some traders even bet on a May cut after US employers added a robust 275,000 jobs last month, more than forecast, but data for prior months were revised down to show fewer job gains.

“The immediate takeaway is the focus on the unemployment rate going from 3.7% to 3.9%,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

“More unemployment rate implies that the economy is slowing, which would, in the markets’ view hopefully, necessitate a rate cut sooner rather than later.”

As stocks scaled fresh peaks, bond yields and the dollar fell, while gold hit new highs for the fourth straight session.

While central banks on both sides of the Atlantic manage expectations of exactly when they will start lowering borrowing costs, investors pushed up the yen after reports that Japan’s central bank may begin hauling rates from negative territory as soon as this month. The dollar headed for its sharpest weekly drop of the year on the growing likelihood of lower borrowing costs.

S&P 500 futures and Nasdaq futures were firmer, after being lower ahead of the job numbers.

Crude oil prices seesawed amid the market’s scrutiny of rate cut timings.

In Europe, the STOXX index of 600 companies was slightly firmer after hitting a new lifetime high of 504.42.

ECB policymaker Francois Villeroy de Galhau said there would be a rate cut in the spring, which he defined as from April until June 21, the date of the central bank’s meeting that month.

German bund yields were on track to record their biggest weekly fall since mid-December on raised bets of an ECB cut in rates.

After the payrolls, attention will immediately turn to next Tuesday’s US inflation report.

Expectations that the Bank of Japan could finally negative interest rates this month lit a fire under the yen, lifting it to a one-month high against the dollar, and pushed domestic bond yields higher as well.

The Nikkei closed up 0.23%. Elsewhere in Asia, Chinese blue chips rose 0.4% and the Shanghai Composite Index gained 0.6%. Both indexes were set to end the week with marginal gains. Hong Kong’s Hang Seng Index rose 0.7%. Hopes of rate cuts put downward pressure on U.S. government bond yields, with the two-year US Treasury yield easing to 4.422%. The benchmark 10-year yield was last trading lower at 4.0691%.

The dollar eased to a roughly two-month low against the euro .

In commodity markets, Brent gave up earlier gains to ease 0.2% to $82.81 a barrel, while US crude fell 0.3% to $78.72 per barrel.

Spot gold edged 0.6% higher to $2,171 an ounce.

Oil prices were little changed on Thursday as markets weighed new economic data from China against increasing supply from the Western Hemisphere. Brent futures rose 11 cents to $83.07 a barrel at 1:55 p.m. EST. US West Texas Intermediate crude fell 9 cents to $79.04.

China’s import and export growth beat estimates, suggesting global trade is turning a corner in a positive signal for policymakers as they try to shore up economic recovery.

But even as China posted a 5.1% rise in crude imports during the first to months of the year from a year earlier, overall imports have been falling, continuing a trend of softening purchases by the world’s biggest buyer.

“The import numbers were down substantially because they are not willing to pay full price for barrels,” said Bob Yawger, director of energy futures at Mizuho. The lack of Chinese demand failed to impress the market, he said.

The global oil market is relatively well supplied with demand growth slowing and supply increasing from the Americas, the head of the International Energy Agency’s (IEA) oil markets and industry division told Reuters on Thursday. Oil inventories in the US rose last week for a sixth week in a row.

“The market continues to be pulled around demand concerns in China, on the one hand, and increasing supply out of the Western Hemisphere,” said Andrew Lipow, president of Lipow Oil Associates.

The markets were bracing for the likelihood that the Federal Reserve could delay its first US interest rate cut to the second half of this year, which boosted the dollar, according to a Reuters poll of foreign exchange strategists. A strong greenback dents demand for dollar-denominated oil among buyers using other currencies.

On Wednesday, Fed Chair Jerome Powell said the central bank still expects to reduce its benchmark interest rate this year. On Thursday, the European Central Bank kept its main interest rate unchanged at 4.0% as expected.

Agencies