US stocks, bonds head higher as jobs growth continues

The good news keeps flowing.
Pictet Asset Management chief strategist Luca Paolini says stocks will continue their momentum.

Stocks on Wall Street continued to advance on their all-time high as the flow of upbeat economic and trade news shows no sign of slowing.

Despite worries that tariffs could slow the global economy, steady US growth and earnings figures have boosted stock indexes throughout the year.

US Federal Reserve officials have reinforced the view that inflation remains steady but not so strong that the pace of interest-rate hikes should increase.

Some investors expect that backdrop to continue lifting stocks in the fourth quarter.

“As long as you don’t see clear evidence of the US economy getting weaker, this momentum can continue,” Pictet Asset Management chief strategist Luca Paolini says.

New data showed the private sector added 230,000 jobs in September, more than economists were expecting, with midsize businesses and the service sector continuing to dominate those gains.

Friday’s jobs report will provide the latest update on hiring and wage growth.

Pleasing both sides
In trade news, commentary has focused on President Donald Trump
s success in pleasing both anti-free trade unions and big business with the new US Mexico Canada Agreement (USMCA).

“This is the template for the new Trump administration playbook for future trade deals,” a senior administration official told a media briefing.

He highlighted measures that steer manufacturing jobs back to the US and meet demands to boost e-commerce and intellectual property protection.

Meanwhile, the US has been meeting regularly with European Union and Japanese trade officials to work out a common strategy to deal with China.

“We’re sending China a message,” National Economic Council director Larry Kudlow told reporters. “They’re not going to break up the allies.”

Some provisions of the new Nafta give a sense of what the US would want out of trade deals with China or other nations.

For instance, the three nations agreed to “avoid manipulating exchanges rates or the international monetary system.” Disagreements would be referred to a dispute resolution panel and could lead to tariffs.

Dow closes at record high
On Wall Street, the Dow Jones Industrial Average closed at a new high – up 54.45 points, or 0.2%, at 26,828.39, after nearing 27,000 in the middle of the session.

The S&P 500 advanced 0.07% to 2925.51, while the Nasdaq Composite was up 0.3% at 8025.51.

Caterpillar (up 2.2%), Apple (up 1.2%) and Goldman Sachs (up 0.9%) led the Dow's gains.

The yield on the benchmark 10-year US Treasury note rose to 3.146% – its highest level since 2011 – from 3.056% on Tuesday. Rising yields lifted shares of banks, as higher long-term yields tend to boost lending profitability. The S&P 500 financials sector added 1.1%.

Meanwhile, the WSJ Dollar Index, which tracks the US dollar against a basket of 16 other currencies, rose 0.4% in a sixth consecutive session of gains.

Oil prices hovered at near four-year highs, as the market girded itself for the reimposition of US sanctions against Iran.

Officials at the state-run National Iranian Oil Co have said they provisionally expect crude shipments to have dropped to about 1.5 million barrels a day in September, compared with 2.3 million barrels a day in June.

Oil keeps rising
US crude for November delivery rose 0.3% to $US75.45 a barrel, while Brent, the global benchmark, gained 0.5% to $US85.26.

In Europe, reports that the Italian government was considering a lower deficit target after next year eased some fears that conflict with the European Union could stoke broader instability.

The Stoxx Europe 600 added 0.5%. Italian stocks and bonds also rebounded.

The question now is whether the EU will be satisfied by what Italy says on its planned deficits, Union Bancaire Privée portfolio manager Mohammed Kazmi says.

“Volatility will remain high until we get the European Commission’s decision, and the rating agency decisions [on Italy] that’ll come later in October,” he says.

Frances CAC 40 rose 0.4%, Germanys DAX fell 0.4% and the UKs FTSE 100 gained 0.5%.

Japan’s Nikkei closed 0.7% down from a nearly three-decade high, while Hong Kong’s Hang Seng shed 0.1%.