US stocks closed with a weekly gain as traders expected a slowdown in wage growth to help the Federal Reserve fight inflation. All major indices rose by more than 2%. Treasuries increased after a US services gauge unexpectedly shrank at the end of 2022. The dollar is headed for the longest streak of weekly losses since November.
The December jobs report failed to paint a clear picture on the state of the US labor market, especially because it came one day after two jobs reports signaled continued tightness. Hiring exceeded estimates for the month and unemployment fell to the lowest in decades as shown by Friday’s report. Traders are continuing to mull how that strength contrasts with the weaker gains in hourly wages and what that means for Fed policy ahead.
Friday’s positive mood in the US spilled in Europe as well. The broad Stoxx 600 index, Germany’s DAX and the euro all rose by 1.2%. Inflation data showed a sharp drop in the eurozone. Separately, eurozone economic sentiment improved in December, with more optimism across all sectors of the economy and a sharp drop in inflation expectations.
Andrew Kenningham, chief Europe economist at Capital Economics said, “The fall in inflation and improvement in economic sentiment in December suggest that the euro zone’s case of stagflation is not as acute as feared a few months ago,”
Energy was the only sector that didn’t benefit from the global rise despite the dollar being sluggish that usually boosts oil prices. Both Brent and WTI were down more than 8% for the week. Both benchmarks had gained around 13% during the previous three weeks.
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