Stocks rise on Fed rate cut hopes after disappointing jobs data
U.S. shares rallied on Monday on generally positive earnings reports and increasing bets for a September rate cut from the Fed after disappointing jobs data on Friday.
Oil prices edged lower after output increases by OPEC+, while gold hovered near a one-week high.
"There are signs of weakness in parts of the U.S. economy, that plays to the view that maybe not in September, but certainly this year that the Fed's still on course to ease potentially twice," said Rodrigo Catril, senior currency strategist at National Australia Bank.
In Europe, the STOXX 600 rose 0.4% in early trading, up for a second day, echoing the strength across Asia markets, where MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.8%.
"The question is whether bad news is bad news (economy slowing down) or it's good news (Fed moving towards rate cuts). Our view is that depends on how bad is the data and what's priced in," Jefferies strategist Mohit Kumar said.
"A modest weakening of the economy would be good news as it should be more easing from the Fed. However, a sustained and sharp rise in unemployment rates would be a negative as it would raise concerns over growth and earnings," he said.
In currencies, the dollar edged up modestly, rising 0.35% against the Japanese yen at 147.6, while the euro fell 0.25% to $1.1543. The dollar index, which tracks the greenback against a basket of six other currencies, rallied 0.34% after a two-day decline.
Friday's soft U.S. nonfarm payrolls data added to the case for a cut by the Fed, and took on another layer of drama with President Donald Trump's decision to fire the head of labour statistics responsible for the figures.
Odds for a September rate cut now stand at about 94%, according to CME Fedwatch, from a 63% chance seen on July 28. Market participants see at least two quarter-point cuts by the end of this year.
News that Trump would get to fill a governorship position at the Fed early also added to worries about politicization of interest rate policy.
Trump again threatened to raise tariffs on goods from India from the 25% level announced last month due to its Russian oil purchases, while New Delhi called his attack "unjustified" and vowed to protect its economic interests.
With concern mounting about the fragility of the underlying economy and the potential for oversupply, oil prices dropped for a fourth day, leaving Brent crude futures down 1% at two-week lows at $68.05 a barrel.
"Whether the threat of secondary sanctions on India's financing of Russia is the core goal remains to be seen. Or indeed, this move may be increased U.S. leverage on India to open up its domestic economy to agricultural imports or commitments to buy U.S. energy instead," strategists at ING said.
Second-quarter U.S. earnings season is winding down, but investors are still looking forward to reports this week from companies including Walt Disney and Caterpillar .
Tech heavyweights Nvidia, Alphabet and Meta surged overnight, and Palantir Technologies raised its revenue forecast for the second time this year on expectations of sustained demand for its artificial intelligence services.
U.S. stock index futures were up 0.2-0.4%, pointing to a modest rise at the start of trading.
Data on Tuesday showed business activity in the euro zone grew at a slightly faster pace in July than in June, but remained sluggish.
A separate UK survey showed
British businesses
recorded their largest drop in new orders in almost three years in July and cutting staff by most in six months.
Data from Asia's two biggest economies showed resilience in their service sectors. In Japan, the S&P Global final services purchasing managers' index (PMI) climbed to 53.6 in July from 51.7 in June for the strongest expansion since February. China's services activity last month expanded at its fastest pace in more than a year.
Bitcoin, meanwhile, fell 0.6% to $114,235, while gold rose 0.1% to $3,375 an ounce.
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