US stocks and Treasuries rally after weak jobs data

The S&P 500 had its biggest one-day gain in almost three months and Treasury yields dropped on Tuesday as traders bet data showing signs of a slowdown in the labour market would ease pressure on the Federal Reserve to further raise interest rates this year.

Wall Street’s benchmark index closed 1.5 per cent higher, the third successive session of gains for the gauge and its biggest daily climb since early June, propelled by a rally in megacap tech stocks. The tech-focused Nasdaq Composite rose 1.7 per cent, its largest one-day increase in a month.

The moves came as US labour market data showed that the number of new job openings fell to 8.827mn in July, landing well below analysts’ forecasts and hitting the lowest level in more than two years. The job quits rate declined to its lowest level in 30 months, an indication that workers are seeing fewer attractive opportunities in the job market.

“The report supports our forecast that the Fed has reached the terminal policy rate, and we expect Friday’s employment report to offer further evidence of loosening in the labour market,” according to Matthew Martin of Oxford Economics.

The closely watched US non-farm payrolls report comes out on Friday, and will help to guide the Fed’s policy decisions as its historic monetary tightening cycle approaches its probable end.

Separately, consumer confidence data from The Conference Board showed that Americans were less optimistic about the outlook for the economy and their finances, with the consumer confidence index falling below economists’ expectations to 106.1 in August, down from a July reading of 114.

“There is no shortage of factors to blame, from diminished pandemic-era savings to the more expensive cost of credit, not to mention the looming resumption of student loan payments this fall,” Wells Fargo analysts wrote.

When asked by The Conference Board about the likelihood of the US falling into a recession within the next year, however, respondents in August reported the lowest level of concern so far in 2023. That would line up with a scenario of the economy experiencing a so-called soft landing.

Yields on the policy-sensitive two-year US Treasuries fell 0.12 percentage points to 4.89 per cent, while yields on the benchmark 10-year note declined 0.1 percentage points to 4.12 per cent. Bond yields fall as prices rise.

European and Asian stocks rose on Tuesday as investors welcomed recent efforts by Beijing to prop up China’s financial markets.

In Europe, the region-wide Stoxx Europe 600 index closed 1 per cent higher, while France’s CAC 40 advanced 0.7 per cent and Germany’s Dax gained 0.9 per cent.

Hong Kong’s Hang Seng index advanced 2 per cent and the CSI 300 climbed 1 per cent. China’s benchmark index had risen 1.2 per cent a day earlier, after much larger early gains melted away.

The Stoxx Europe 600 Basic Resources index was up 2.1 per cent, as traders hoped that fresh economic support measures announced in China over the weekend would bolster demand in the world’s second-largest economy.

China’s finance ministry on Sunday cut its levy on share trading to 0.05 per cent, the first such reduction since the 2008 financial crisis and the latest in a number of measures intended to support the country’s struggling markets.

Separately, the China Securities Regulatory Commission, a stock market regulator, promised to slow the pace of initial public offerings as new listings tend to depress valuations and lower liquidity in broader markets.

The moves mark the latest attempts by Chinese authorities to reinvigorate the economy, which struggled to bounce back as the country reopened from three years of strict Covid-19 lockdowns earlier this year.

“If policy measures continue to be unveiled in the coming weeks, the market narrative may shift from ‘too little, too late’ to a more confident stance as policymakers regain credibility,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Beijing vowed to extend greater economic support in late July, which temporarily boosted net foreign inflows to Chinese stocks, but they have since been reversed.

In oil markets, international benchmark Brent crude and US marker West Texas Intermediate each rose 1.3 per cent, to $85.49 a barrel and $81.16 a barrel, respectively.