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U.S. stock index futures extend gains after payrolls
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Analysts say Fed set to pause hikes in Sept
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China takes further steps to aid flagging economy
By Huw Jones
LONDON, Sept 1 (Reuters) - Global shares extended their gains on Friday after U.S. payrolls data showed a rise in unemployment and moderation in wage growth last month, helping to cement market bets that the Federal Reserve is done with raising interest rates.
The non-farm payrolls data showed that the U.S. unemployment rate rose to 3.8% in August, sending bond yields lower as futures markets indicated almost no chance of a September rate hike by the Fed and about a 35% chance of a hike in November, helping to buoy stocks.
"When we look at this number, it still leaves anticipation of the Fed leaving rates unchanged at the September meeting," said Art Hogan, chief market strategist at B. Riley Wealth Management.
U.S. stock index futures extended their gains after the payrolls numbers which showed an increase of 187,00 jobs last month, above a Reuters poll of economists for 170,000.
"This should spur further U.S. dollar weakness and moderating bond yields from cycle peaks which will help equities grind higher from here," said John Leiper, chief investment officer at Titan Asset Management.
Oil was up about 1% to hover above $87 a barrel as crude prices looked set to snap a two-week losing streak, buoyed by expectations of tightening supplies.
The fading prospects for a rate hike and subsequent falls in U.S. Treasury yields this week weighed on the dollar , which was on track to snap a six-week winning run.
China stepped up measures to boost its economy, with top banks paving the way for further cuts in lending rates and Beijing also cutting the amount of funds institutions need to hold in foreign exchange reserves.
Investors also drew some comfort from an unexpected rebound in China manufacturing and signs that a downturn in euro zone manufacturing eased last month.
The MSCI All Country stock index rose 0.2%, now up more than 13% for the year despite a battering in August when bond yields surged.
Kevin Thozet, a member of the investment committee at Carmignac, said he expects the Fed to leave interest rates unchanged in September, with a 50:50 chance of a hike when it meets again in November as steam starts to leave the jobs market.
"The U.S. economy is very resilient and keeps postponing the odds of a recession. It means that the soft landing scenario is gaining traction, there's less of a risk that the Fed would have to do too much. That is one reason why markets are well behaved," Thozet said.
There are also doubts that the European Central Bank would hike rates when it meets this month as the euro zone economy sags, analysts said.
In Europe, the STOXX index of 600 companies was up 0.3%, on track to gain nearly 2% for the week and about 7.8% higher for the year.
Danish drugmaker Novo Nordisk briefly unseated LVMH as Europe's most valuable listed company in intraday trading, interrupting the French luxury group's 2-1/2 year-long reign at the top.
LVMH has been hurt by China growth worries, while Novo is riding a wave of demand for its highly effective diabetes and weight-loss drugs Ozempic and Wegovy.
'PROACTIVE' CHINA
All eyes are on Beijing's efforts to revive the crisis-hit property sector and weak consumption, which are weighing heavily on the Chinese economy.
Meanwhile, China's factory activity surprisingly returned to expansion in August, beating estimates, a private-sector survey showed on Friday. Supply, domestic demand and employment improved, suggesting official efforts to spur growth might be having some effect.
Even though Beijing's support measures so far are not large in scope, the fact that policymakers are announcing steps more rapidly may be giving markets confidence that authorities are now being more proactive, said Redmond Wong, Greater China market strategist at Saxo Markets in Hong Kong.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3%, while Japan's Nikkei was also up 0.3%.
China's onshore yuan surged to a high of 7.2360 per dollar in the early Asian session, its strongest since Aug. 11, before last fetching 7.2625.
China's benchmark index was up 0.7%, with the real estate gauge narrowing earlier gains to 0.35%.
The yield on benchmark U.S. 10-year notes reversed course to ease to 4.0868%.
Two-year Treasury yields, which are particularly sensitive to rate expectations, have declined about 20 basis points this week to 4.86%, the biggest fall since mid-March.
On Friday the two-year yield eased further after the payrolls numbers to 4.8035%.
U.S. crude rose 0.9% to $84.38 per barrel and Brent was at $87.57, up 0.8%.
Spot gold was 0.4% firmer at $1,948 an ounce.
In cryptocurrencies, bitcoin unwound nearly all of its gains for the week, last trading at $26,026, up 0.4% on the day. It had fallen 5% overnight after the Securities and Exchange Commission (SEC) delayed a decision on whether to approve several applications for spot bitcoin ETFs.
