Emerging market stocks and currencies experienced gains following a weaker-than-expected US jobs report for July. This data led investors to believe the Federal Reserve is less likely to raise interest rates at its September meeting, with the probability of a hike dropping to around 44% from 67% a week prior. This shift in expectations weakened the US dollar and encouraged a renewed interest in riskier assets, benefiting emerging markets.
The soft jobs data indicated that employers unexpectedly cut jobs in July, and previous months' hiring figures were revised downward, suggesting a weaker labor market than anticipated. This information caused US Treasury yields to fall, contributing to a rally on Wall Street where indices reached record highs. The euro also benefited, approaching a seven-week high of $1.1557. Analysts noted that the "bad news is good news" reflex on Wall Street was triggered, allowing investors to lean into riskier assets as concerns about immediate monetary tightening eased.
Asian share markets, tracking gains on Wall Street, also rose. Japan's Nikkei 225 gained 0.6%, while South Korea's Kospi increased by 0.5%. MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.3%. The yen, however, traded weaker against the dollar at around 158.20 despite strengthening after the labor data release, as the effect of recent interventions faded. The MSCI All Country World Index, a broad gauge of global equities, rose 0.1%, marking its seventh advance in the past eight sessions, with technology stocks particularly benefiting from the reduced rate hike concerns.
