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European equities had their biggest rise since late July on Monday as weaker-than-expected US jobs data suggested pandemic-era stimulus, which has helped prop up markets, may continue for longer than anticipated.
The Stoxx Europe 600 index gained 0.7 per cent, the region-wide benchmark’s best day in six weeks, as traders analysed the implications of a large miss in US job creation. Employers in the US added 235,000 jobs in August, which fell wide of economists’ projections of more than 728,000 new hires.
“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 that 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”.
London’s FTSE 100 index also ended the session 0.7 per cent higher while US markets were closed for Labor Day.
Economists expect the European Central Bank to provide an update about its own 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 mid-July.
Technology shares, which tend to perform well when expectations of low-for-longer bond yields flatter valuations of growth companies, were the best performers in Europe with the sector rising 1.7 per cent on Monday.
In Asian equity markets on Monday, Chinese shares rallied after vice-premier Liu He said 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 gained 1.8 per cent as investors bet that last week’s abrupt resignation by prime minister Yoshihide Suga would usher in a successor more focused on protecting the nation’s economy from rising Covid-19 cases.
Brent crude, the international oil benchmark, slid 0.7 per cent to $72.10 a barrel.