Global stock markets fall after US jobs report as investors keep eye on Fed

Global stock markets mostly ended down on Friday after data showed US employers added jobs at a better-than-expected pace last month, raising the prospect that the Federal Reserve's aggressive interest rate hikes will not be enough to contain inflation and avoid a recession.

Wall Street's three major stock indexes ended lower. The tech-heavy Nasdaq Composite led the decline, dropping 2.47 per cent, with shares of market heavyweights Apple and Tesla the biggest drags on the market. The Dow Jones Industrial Average fell 1.05 per cent, while the S&P 500 lost 1.63 per cent.

Earlier, the Labour Department's closely watched report showed non-farm payrolls rose by 390,000 jobs last month and wages grew, while the unemployment rate held steady at 3.6 per cent – all signs of a tight labour market.

While the jobs report was reassuring for the current state of the economy, investors focused primarily on its potential influence on central bank policy.

"The market is trying to funnel its response through what the Fed may or may not do," said Nela Richardson, chief economist at ADP, who expects the market to continue to seesaw as a result of uncertainty around interest rates and inflation.

Shawn Snyder, head of investment strategy at Citi Personal Wealth Management, saw the solid report as a double-edged sword.

"It's telling us the economy is in fairly good shape which is good news but when viewed in the context of what it means for the Federal Reserve and tightening monetary policy it likely makes them more confident they can continue to tighten," he said. "That comes through as a bit of a negative for investors because they're hoping for the Fed to pause later this year."

In Europe, Frankfurt's DAX closed down 0.2 per cent and Paris's CAC 40 declined 0.2 per cent. London's FTSE was closed for a holiday.

Earlier in Asia, Tokyo's Nikkei 225 closed up 1.3 per cent. Markets in Hong Kong and Shanghai were closed for holidays.

American employers added 390,000 jobs last month, a sign of a slowdown in hiring but still above forecasts amid a shortage of workers. The jobless rate held steady at 3.6 per cent for the third consecutive month.

The Fed has hiked interest rates to combat sky-high inflation, but investors worry that more aggressive moves could backfire and hamper economic growth.

The jobs report contained some positive news for the Fed: wage gains slowed in the month and more people returned to the workforce.

But the central bank has signalled big rate hikes are coming, and the increases are likely to continue through the end of the year, adding to investor worries about the economic outlook.

Worst is not over

"We are still in a bear market and until proven otherwise the path of least resistance is down," Maris Ogg of Tower Bridge Advisors, told AFP.

She noted that major components of inflation are not improving.

"Oil is not going to get better, labor is not going to get better, housing is not going to get better. Housing and labor are in shortage," she said. "As far as the stock market goes, I would be surprised if the worst is over."

The European Central Bank has indicated it will raise interest rates in July for the first time in more than a decade.

Among major companies, Tesla shares plunged 9.2 per cent after the electric carmaker's chief executive Elon Musk told employees the company plans to cut the salaried workforce by 10 per cent and rely on more hourly workers because he had a "super bad feeling" about the economy.

The US dollar edged higher against a basket of currencies after the employment report. The dollar index rose 0.393 per cent, with the euro was down 0.25 per cent to $1.0718.

Gold prices fell nearly 1 per cent after bullion's appeal was dented by the rise in the US dollar and Treasury yields following the strong jobs data.

Spot gold dropped 0.9 per cent to $1,850.57 an ounce, while US gold futures fell about 1 per cent to $1,848.10 an ounce.

News agencies contributed to this report