Global stock markets pulled back on Friday as a wave of strong U.S. jobs data dampened hopes for interest rate cuts, halting a recent rally that had lifted equities near record levels.
Investors had ridden a wave of optimism through most of July, driven by expectations of trade agreements and central bank policy easing. However, the release of robust U.S. labor market figures renewed fears that the Federal Reserve might delay cutting rates.
The latest data showed 217,000 new jobless claims for the week ending July 19 the lowest since mid-April reinforcing the view that the labor market remains tight. This follows stronger-than-expected non-farm payroll numbers in June and inflationary pressure partly attributed to U.S. tariffs beginning to take effect.
As a result, traders have dialed back their expectations for rate cuts this year. According to Bloomberg, the market is now pricing in just 42 basis points of easing by year-end, down from more than 50 basis points earlier in the month.
Wall Street’s Thursday high with the S&P 500 marking its 10th record in 19 sessions was short-lived, as markets reassessed the outlook. The Dow Jones Industrial Average closed down 0.7% at 44,693.91.
Meanwhile, political pressure on the Fed resurfaced as former President Donald Trump visited the central bank’s headquarters Thursday, pressing Fed Chair Jerome Powell to lower rates. During the visit, Trump criticized the cost of the Fed’s renovations and reiterated his belief that the economy would perform even better with looser monetary policy.
“As good as we’re doing, we’d do better if we had lower interest rates,” Trump told reporters.
On the trade front, Brussels and Washington appeared to be closing in on a deal that would slash Trump’s proposed 30% tariffs by half. Still, the European Union is preparing for a breakdown in negotiations, with member states greenlighting a €93 billion ($109 billion) counter-tariff package.
With no fresh drivers for upside momentum, Asian markets ended the week lower. Tokyo’s Nikkei 225 dropped 0.9% after a strong two-day rally, while Hong Kong’s Hang Seng Index fell 1.1%. Losses were also recorded in Shanghai, Sydney, Mumbai, Singapore, and Manila. Seoul, Jakarta, Bangkok, and Wellington managed modest gains.
In early European trading, London, Paris, and Frankfurt all opened lower, tracking the downbeat sentiment.
Meanwhile, the U.S. dollar climbed higher against major currencies as traders adjusted their interest rate outlook.
KEY MARKET FIGURES (as of 08:10 GMT):
- Tokyo – Nikkei 225: ▼ 0.9% to 41,456.23 (close)
- Hong Kong – Hang Seng: ▼ 1.1% to 25,388.35 (close)
- Shanghai – Composite: ▼ 0.3% to 3,593.66 (close)
- London – FTSE 100: ▼ 0.4% to 9,103.42
- New York – Dow Jones: ▼ 0.7% to 44,693.91 (previous close)
Currencies:
- Dollar/Yen: ▲ 147.40 from 146.94
- Euro/Dollar: ▼ $1.1751 from $1.1756
- Pound/Dollar: ▼ $1.3469 from $1.3507
- Euro/Pound: ▲ 87.28p from 87.01p
Oil:
- WTI Crude: ▲ 0.4% to $66.33 per barrel
- Brent Crude: ▲ 0.5% to $69.53 per barrel
