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European equities brightened as investors bought in to the region’s economic recovery and weaker-than-expected US jobs data took pressure off the US central bank to reduce the monetary stimulus that has boosted global markets through the pandemic era.
The Stoxx 600 index gained 0.7 per cent, having dropped on Friday as traders struggled to analyse the implications of a sharp fall in US job creation in August to just 235,000 new hires.
London’s FTSE 100 index added 0.8 per cent while US markets were closed for Labor Day.
“The weak jobs number gave the Federal Reserve ample room to take it easy in terms of how and when it will taper” its $120bn of monthly bond purchases begun in March 2020, said Maarten Geerdink, head of European equities at NN Investment Partners.
Before Friday’s non-farm payrolls report, some analysts had expected the Fed to announce a reduction of its asset purchases as early as this month.
European stocks, Geerdink added, were “in a sweet spot with the eurozone economy doing well while financial conditions remain extremely loose”.
While unofficial data suggest a rebound in eurozone business activity driven by tourism and consumer spending, the European Central Bank has not announced how it might wind down its €1.85tn emergency bond-buying programme, launched last year to shield the bloc’s financial system from the coronavirus crisis.
Economists expect the ECB to provide an update about the future of its debt purchases at its meeting on Thursday, with government bond prices signalling some expectations of a pullback. The yield on the benchmark German 10-year Bund, which moves inversely to its price, was steady on Monday at minus 0.37 per cent, around its highest point since late July.
Technology shares, which tend to perform well when expectations of low-for-longer bond yields flatter valuations of long-term growth companies, were the best performers on the Stoxx on Monday, rising 1.6 per cent.
The dollar index, which measures the US currency against six others, rose 0.2 per cent, reversing a drop on Friday in the aftermath of the non-farm payrolls report. The euro slipped 0.1 per cent against the dollar to purchase $1.1865.
Brent crude, the international oil benchmark, rose 0.1 to $72.66 a barrel.
In Asian equity markets on Monday, Chinese shares rallied after vice-premier Liu He said that the government would continue to support private businesses despite a regulatory crackdown across the technology and education sectors.
“Policies for supporting the private economy have not changed . . . and will not change in the future,” Liu said in comments reported by state news agency Xinhua. The CSI 300 index of mainland Chinese stocks climbed 1.9 per cent.
Japan’s Nikkei 225 also gained 1.8 per cent as investors bet that last week’s abrupt resignation by unpopular prime minister Yoshihide Suga would usher in a successor more focused on protecting the nation’s economy from rising Covid-19 cases.