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World stocks surged to a two-week high on Monday after strong US jobs data at the end of last week helped take the edge off investors' concerns about the potential outbreak of trade war between the United States and other major economies.
European shares shot up across the board, following their Asian counterparts, while emerging market currencies strengthened as investors bought up so-called riskier assets and sold “safe haven” securities such as gold and government bonds.
High growth, low inflation
Markets have been cheering Friday's US nonfarm payrolls data which showed a hefty 313,000 rise in jobs, but also revealed that annual growth in average hourly earnings had slowed to 2.6 per cent after spiking in January.
This suggested that the world's largest economy is experiencing a combination of high growth and low inflation, referred to in the market as a “Goldilocks” trend; giving investors an incentive to buy assets such as equities and high-yield bonds without having to fear tighter central bank policy.
“Friday's US employment data was about as perfect a set of figures as you can get from a policy maker's point of view. The increase in jobs was nothing short of amazing,” said Marshall Gittler, a strategist at ACLS Global, a currency brokerage.
“In other words, it was a 'Goldilocks' report: not too hot, not too cold, just right.”
As a result, the S&P500 surged more than 1.7 per cent on Friday -- its second-best day of the year so far -- and the warm glow extended around the globe on Monday.
Trade war fears ease
Germany's DAX led gains in Europe, rising 0.9 per cent, and MSCI's world equity index, which tracks shares in 47 countries, hit a two-week high. Earlier, MSCI's index of Asia-Pacific shares outside Japan climbed 1.3 per cent, poised for a third session of gains.
South Korea rose 1 per cent, while Australia's main index added 0.7 per cent, boosted by mining shares on news that Australia could be exempt from new US trade tariffs on steel and aluminium imports.
Concerns over those tariffs have been weighing on European stocks, with the main pan-European stock index hitting a seven-month low at the start of the month. It has recovered somewhat from that trough to rise 0.3 percent on Monday.
The jobs news also lifted currencies such as the Mexican peso and Canadian and Australian dollars, while weighing on the safe-haven yen.
Those cross currents left the US dollar a shade lower against a basket of currencies. Inflation data from the world's largest economy is due on Tuesday.
Investors had trimmed holdings of yen last week on news US President Donald Trump was prepared to meet with North Korean leader Kim Jong Un, a potential breakthrough in nuclear tensions in the region.
US officials on Sunday defended Trump's decision, saying the move was not just for show and not a gift to Pyongyang.
“Now the US is back to goldilocks at least for now, the tariffs are less severe, and Kim and Trump are to meet,” said Shane Oliver, Sydney-based chief economist at AMP.
“We still expect more volatility this year as many of these issues have further go run, but the broad trend in shares likely remains up.”
Brent crude gave up some of Friday's gains, dropping 27 cents to $65.22 a barrel, as rising U.S. output loomed over markets despite a slowdown in rig drilling activity.
Gold prices also slipped 0.3 percent $1,320.46 an ounce.
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