Volkswacht Bodensee - Stocks track Wall St rally as US jobs data ease recession fears

Equities across the planet have seen big fluctuations since a closely watched gauge of the US labour market came in well below forecasts and fanned fears the Federal Reserve may have waited too long to cut interest rates.

The non-farm payrolls report last Friday came just days after the US central bank hinted at a reduction in September and the Bank of Japan announced its second hike in 17 years, hinting at more to come.

Those decisions sent the yen soaring to just under 142 per dollar and caused a rapid unwinding of the so-called carry trade in which traders take advantage of the weaker currency to buy higher-yielding assets such as equities.

Equities went into meltdown on Monday, with the Nikkei 225 in Tokyo diving more than 12 percent in its heaviest one-day drop since Black Thursday in 1987, with the stronger yen battering exporters.

However, while traders remain wracked with uncertainty, they have managed to claw back much of the loss suffered at the start of the week, helped by dovish comments from the BoJ that it would not lift rates while markets were being roiled.

Confidence was given an extra boost Thursday from news that fewer people than forecast had applied for unemployment benefits last week, tempering worries about the economy.

All three main indexes on Wall Street jumped, with the S&P 500 enjoying its best day since November 2022.

And Asia followed suit Friday.

Tokyo was helped by a weaker yen -- it was sitting above 147 to the dollar Friday -- while Hong Kong, Sydney and Seoul were more than one percent higher, with Taipei surging almost three percent.

Mumbai, Bangkok and Manila were also in positive territory along with London, Paris and Frankfurt.

However, Shanghai and Wellington edged down.

Data showing that Chinese inflation rose more than expected in July provided a much-needed optimistic view of the country's stuttering economy.

"The fallback in initial claims is consistent with the only modest deterioration in permanent layoffs in the US labour market," said National Australia Bank's Taylor Nugent.

He added that the unemployment rate had been driven by a rise in the labour force and a jump in temporary layoffs.

"Despite the volatility in claims data, especially around this time of year, the data helped allay fears of a more rapid deterioration in the labour market."

Traders are now awaiting the release of US inflation data next week as they try to judge the Fed's plans for rates after it faced calls to slash before next month's meeting.

Slowing prices and a softening labour market have ramped up bets on at least one reduction before January.

However, Kansas City Fed chief Jeffrey Schmid said that while the recent softer inflation readings were "encouraging", he wanted to see it come back closer to the bank's two percent target before agreeing to a cut.

"We are close, but we are still not quite there," he told the Kansas Bankers Association. "The path of policy will be determined by the data and the strength of the economy."

Despite last Friday's data, he added that the labour market remained healthy.

"It is important to note that many other indicators point to continued strength," he said.

- Key figures around 0710 GMT -

Tokyo - Nikkei 225: UP 0.6 percent at 35,025.00 (close)

Hong Kong - Hang Seng Index: UP 1.3 percent at 17,115.20

Shanghai - Composite: DOWN 0.3 percent at 2,862.19 (close)

London - FTSE 100: UP 0.3 percent at 8,166.69

Dollar/yen: DOWN at 147.15 yen from 147.20 yen on Thursday

Euro/dollar: UP at $1.0927 from $1.0921

Pound/dollar: UP at $1.2769 from $1.2750

Euro/pound: DOWN at 85.57 pence from 85.63 pence

West Texas Intermediate: UP 0.1 percent at $76.24 per barrel

Brent North Sea Crude: FLAT at $79.15 per barrel

New York - Dow: UP 1.8 percent at 39,446.49 (close)

-- Bloomberg News contributed to this story --

F.Stadler--VB