Wall Street up despite US jobs data dashing early rate cut hopes

Wall Street stocks edged higher Friday, despite strong US jobs numbers pouring cold water on hopes the Federal Reserve will cut interest rates in the world's top economy in the next few months.

The Fed signaled last month it sees itself beginning to cut interest rates in 2024, which helped stock markets finish the year on a strong note.

But minutes from its policy meeting, released this week, showed officials were in no hurry and expected to keep borrowing costs at a two-decade high for some time to ensure they have inflation under control.

With a tight labor market and wage growth seen as a potential threat to the central bank's goal of bringing inflation down to its two percent target, investors were eyeing employment data for its implications on policy.

Friday's data showed US job growth surged in December to 216,000 jobs in the final month of 2023, confounding expectations of a slowdown from November.

"The key takeaway from the report is that it wasn't weak, so the market is going to have to grapple with the notion that the Fed may not cut rates as many times in 2024 as the market had come to expect at the end of 2023," said market analyst Patrick O'Hare at Briefing.com.

- A soft landing? -

But Wall Street stocks eked out gains on Friday, even as major indices posted their first weekly declines in weeks.

"The US economy appears to have maintained its resilience into the end of 2023 with little sign of the recession that markets have become increasingly fearful of," said CMC Markets analyst Michael Hewson.

Jack Ablin, chief investment officer at Cresset, said: "A strong labor market is good news, it really helps make the case for a soft landing."

This refers to a scenario where inflation comes down without a major downturn.

On Friday, data also showed that US service sector activity grew less than expected in the final month of 2023.

European markets were off sharply after data showing eurozone inflation turning higher again last month also raised questions about the timing of European Central Bank interest rate cuts.

But they managed to claw back most losses, with Frankfurt's DAX index briefly poking into the green.

Meanwhile, shares in French spirits makers tumbled after Chinese authorities launched an anti-dumping probe into brandy imported from the European Union.

China imported more brandy than any other spirit in 2022, most coming from France, said a report by research group Daxue Consulting.

Shares in Remy Cointreau, which sells cognac and brandy, closed down nearly 12 percent. Shares in Pernod Ricard, maker of Martell cognac, dropped 3.6 percent. Luxury group LVMH, maker of Hennessy cognac, shed 1.4 percent.

Oil prices rose as Danish shipper Maersk announced that it would divert all vessels around Africa instead of using the Red Sea and Suez Canal for the "foreseeable future" after Yemeni rebels attacked its merchant ships.

- Key figures around 2130 GMT -

New York - Dow: UP 0.1 percent at 37,466.11 (close)

New York - S&P 500: UP 0.2 percent at 4,697.24 (close)

New York - Nasdaq: UP 0.1 percent at 14,524.07 (close)

London - FTSE 100: DOWN 0.4 percent at 7,689.61 (close)

Paris - CAC 40: DOWN 0.4 percent at 7,420.69 (close)

Frankfurt - DAX: DOWN 0.1 percent at 16,594.21 (close)

EURO STOXX 50: DOWN 0.2 percent at 4,463.51 (close)

Tokyo - Nikkei 225: UP 0.3 percent at 33,377.42 (close)

Hong Kong - Hang Seng Index: DOWN 0.7 percent at 16,535.33 (close)

Shanghai - Composite: DOWN 0.9 percent at 2,929.18 (close)

Euro/dollar: DOWN at $1.0942 from $1.0952 on Thursday

Dollar/yen: UP at 144.69 yen from 144.61 yen

Pound/dollar: UP at $1.2718 from $1.2682

Euro/pound: DOWN at 86.01 pence from 86.32 pence

West Texas Intermediate: UP 2.2 percent at $73.81 per barrel

Brent North Sea Crude: UP 1.5 percent at $78.76 per barrel