SINGAPORE/LONDON – Global stocks traded near record highs on Thursday, with the dollar firming after surprisingly strong U.S. jobs data dampened hopes for near-term interest rate cuts and a number of major companies were scheduled to report results in Europe.
The U.S. economy created nearly twice as many jobs as expected in January, a report on Wednesday said, allaying some concerns about a softening labor market and keeping hopes for several more interest rate cuts in the U.S. this year.
MSCI’s All World index, which has risen nearly 4.5% this year, has climbed for five days and is closing in on Wednesday’s all-time high.
Europe’s STOXX 600 index rose 0.5%, also hitting a new record high, on strong results from luxury retailer Hermès and French digital building infrastructure group Legrand.
Investor confidence has been shaken this month with a series of stocks falling in sectors such as asset managers, insurance companies, and hardware and software makers on concerns about the potential for AI to disrupt these industries.
Return to macro basics
A return to macroeconomic basics has brought much-needed relief to financial market participants.
Market expectations that the Fed would cut interest rates by at least 25 basis points in March had risen to about 20% before the jobs report, but have fallen to about 5%, according to CME’s FedWatch tool.
Thomas Matthews, head of Asia-Pacific markets at Capital Economics, said the overall picture was that labor market conditions could tighten.
“If that happens, investors may be overestimating the likelihood of further easing, and Treasuries could suffer a bit more.”
The two-year Treasury yield, which is typically tied to the Federal Reserve’s interest rate forecast, rose nearly 6 basis points on Wednesday to 3.508%, the biggest single-day increase since October.
Rising yields helped keep the dollar stable. Still, analysts said uncertainties around the Fed’s independence and policy risks suggest the dollar will need more of these positive surprises in the data to sustain its rebound.
“Good news and bad news” for the dollar
“After yesterday’s market, there is some good news and some bad news for the dollar.”
Payroll calculation
. “It’s intuitive that the jobs report was good,” said Francesco Pesole, a strategist at ING.
He said the bad news was that the dollar should have rebounded more strongly on these numbers, especially because of the rise in short-term interest rates.
“Instead, I read it as a sign that the market continues to look to sell on dollar strength with long-term considerations. This means the hurdles for dollar recovery are higher. We need better data to start.”
Inflation data is expected to be released on Friday, the next test of market views on a rate cut.
Fiscally responsible government increases yen
The yen extended its gains this week as investors cheered the idea that a new government could take fiscal responsibility and could improve Japan’s public finances in the long term.
The yen rose 2.7% this week to 152.95 yen to the dollar, well below the U.S. currency’s all-time high of 157.95 yen on Monday.
“Yen shorts are collectively reevaluating their positions, but at this stage the bearish trend in the yen that began in early 2025 looks more like a reversion to the mean than the start of a structural bull market,” said Chris Weston, head of research at Pepperstone.
“That said, traders need to remain open-minded as the macro picture evolves.”
The euro stabilized at $1.1883 and the pound sterling at $1.364 after data showed Britain’s economy barely grew in the final quarter of 2025.
Gold was down 0.3% at $5,065 an ounce after gaining more than 1% in the previous session.
