Asian shares rose on Monday and the dollar dragged itself off its lowest levels in nearly a month after U.S. nonfarm payrolls showed the slowest job growth in more than five years, quashing expectations for a near-term U.S. interest rate hike.
European equity futures were higher, tracking Asian gains and portending gains, despite a larger-than-expected drop in German industrial orders.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.7 percent.
Japan’s Nikkei stock index pared losses but still ended down 0.4 percent, after the U.S. jobs surprise knocked the dollar and pushed the yen higher.
Wall Street ended down on Friday, though off session lows, with the S&P 500 finishing within just 1.5 percent of its record closing high.
U.S. nonfarm payrolls rose by just 38,000 last month, the smallest increase since September 2010 and well shy of expectations for a rise of 164,000. All 105 economists polled by Reuters had forecast higher numbers.
A Reuters poll of Wall Street’s top banks taken after the data showed that all of them expect the U.S. Federal Reserve to leave interest rates unchanged at its June 14-15 policy meeting.
“I am still on the side that the U.S. economy is better than these data look, but it is also the case that the Fed has less confidence than I do and the market is unlikely to turn around unless there is a major piece of data that surprises on the upside,” Steven Englander, managing director and global head of G10 FX strategy at Citigroup in New York, said in a note.
Data on the U.S. nonmanufacturing sector also disappointed, showing a drop in the May headline index to 52.9 from 55.7 in April.
Fed funds futures rates indicated that traders see only a 6 percent chance of a Fed hike this month, down from 21 percent as recently as Thursday, according to CME Group’s FedWatch tool.
Later on Monday, Federal Reserve Chair Janet Yellen will address an event in Philadelphia. Markets will pay close attention to her last official remarks ahead of the pre-meeting media blackout.
“If she hints at a possibility of an interest rate hike next month, if not this month, the dollar may not fall further, and the impact to the stock market can be limited,” said Takuya Takahashi, an equity strategist at Daiwa Securities.
Boston Fed President Eric Rosengren, speaking in Finland, said the U.S. economy’s rebound from a weak winter has moved the central bank closer to raising rates, though the poor employment report might give it pause.
Cleveland Federal Reserve President Loretta Mester on Saturday said that gradual interest rate increases still seemed appropriate, and that the jobs figures did not change the overall economic picture.
The dollar index, which tracks the greenback against a basket of six major currencies, added 0.2 percent to 94.226 but remained not far above Friday’s low of 93.855, its lowest since May 12.
The dollar rebounded 0.4 percent to 106.96 yen after touching 106.35 earlier in the session, its weakest in a month.
Japan’s vice finance minister for international affairs, Masatsugu Asakawa, said on Monday that he was closely watching movements in foreign exchange markets.
The euro was down 0.2 percent at $1.1342, after nosing up to $1.1375 earlier, its highest level since May 13.
Sterling tumbled 0.9 percent to $1.4384 after sinking as low as $1.4352 earlier. It is wallowing around three-week lows as voters in Britain gear up for the June 23 referendum on whether to remain in the European Union. Recent polls have shown more respondents favoring “Brexit.”
Crude oil prices retook some ground after plunging more than 1 percent in the wake of Friday’s U.S. job data. Weekly industry data had also shown U.S. drillers added rigs for only the second time this year.
U.S. crude futures advanced 0.8 percent to $49.01 per barrel, after logging a 1.1 percent drop for the week, the first weekly decline in four weeks.
Brent crude futures rose 0.7 percent to $49.97, after the eighth weekly gain in nine weeks.
Spot gold shed 0.3 percent to $1,240.80 per ounce after earlier rising as high as $1,248.40, its loftiest since May 24.