U.S. stocks, bonds rise on rate cut anticipation

Dow Jones Industrial Average, S&P 500 and Nasdaq all added between 0.75 per cent and 1 per cent

 U.S. stocks were mostly higher on Thursday and Treasury yields dropped, as a cooling labor market and dovish comments from U.S. central bank officials pointed to a likely interest rate cut this month.

Private payrolls in August rose less than anticipated, while weekly jobless claims came in higher than expected.

Traders on Wall Street and in Europe pushed equities up even after Chinese bourses tumbled overnight on reports that Beijing wanted to cool a strong stocks rally, especially the tech sector.

U.S.’ Dow Jones Industrial Average, S&P 500 and Nasdaq all added between 0.75 per cent and 1 per cent, while the FTSEurofirst 300 gained 0.6 per cent.

Oil prices dropped after a Reuters report that OPEC+ officials are looking at increasing output targets this weekend. The dollar ticked up ahead of Friday’s U.S. jobs report.

A number of U.S. central bank officials have bolstered expectations of an imminent rate cut in recent days. Money markets are now pricing in a near-100 per cent chance that a rate cut will be delivered at the country’s central bank meeting in just under two weeks.

European bond buyers nudged down the German 30-year bond yield to 3.3 per cent. France’s was down to 4.39 per cent after hitting 4.523 per cent on Tuesday, its highest since June 2009, on worries that its government could collapse again.

We believe bond investors are focusing on the long-term sustainability of current deficit growth rates, Scott Wren, senior global market strategist at the Wells Fargo Investment Institute, said in a client note on Thursday. Meanwhile, the U.S. economy is slowing, which puts some downward pressure on yields.