NEW YORK/LONDON, – Global equities surged over 1% on Thursday, buoyed by a surprising drop in U.S. unemployment claims that eased concerns about an impending recession. The positive labour market data also drove up Treasury yields and strengthened the U.S. dollar.
Oil prices continued their upward trend, poised for a third consecutive day of gains. Growing supply risks in the Middle East helped counterbalance earlier concerns about demand that had pushed oil prices to their lowest levels since early 2024 at the start of the week.
The U.S. Labor Department reported a significant decline in initial claims for state unemployment benefits, which fell by 17,000 to a seasonally adjusted 233,000 for the week ending August 3. This marks the largest drop in nearly 11 months, surpassing economists’ expectations of 240,000 claims.
“This data reinforces the idea that the labor market remains robust, despite previous concerns from the payroll report. It also suggests that widespread layoffs are not occurring, which is encouraging for the markets,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities in New York.
The unemployment claims data provided a much-needed boost to investor sentiment, following a weaker-than-expected July jobs report that had triggered a global market sell-off earlier in the week. The sell-off forced investors to unwind carry trades, which contributed to a sharp decline in Japanese stocks and a 3% drop in the S&P 500 on Monday.
However, Wall Street opened Thursday on a bullish note. By mid-morning, the Dow Jones Industrial Average had climbed 519.74 points, or 1.34%, to 39,283.19. The S&P 500 gained 95.31 points, or 1.83%, to 5,294.81, while the Nasdaq Composite rose 350.88 points, or 2.17%, to 16,546.69.
MSCI’s global stock gauge rose 1.09% to 779.10 points, while Europe’s STOXX 600 index edged up 0.05%.
Despite the positive momentum, analysts cautioned that market volatility is likely to persist. “When you experience a volatility shock like this, it often leads to sudden reversals and continued uneasiness as markets adjust,” said Erik Nelson, macro strategist at Wells Fargo. “I wouldn’t be surprised if the market doesn’t simply return to a state of calm.”
Stronger Dollar
In currency markets, the U.S. dollar strengthened, with the dollar index—which measures the greenback against a basket of major currencies—rising 0.24% to 103.36. The dollar also gained 0.49% against the Japanese yen, reaching 147.41 yen, while the euro dipped 0.19% to $1.09.
U.S. Treasury yields climbed in response to the encouraging unemployment claims data, signaling reduced fears of an imminent recession. The yield on the benchmark 10-year Treasury note rose 3.8 basis points to 4.005%, while the 30-year bond yield increased by 3.1 basis points to 4.2919%. The yield on the 2-year note, closely tied to interest rate expectations, jumped 6.8 basis points to 4.069%.
Oil and Precious Metals
In the energy sector, U.S. crude oil prices rose 0.84% to $75.86 per barrel, while Brent crude gained 0.49% to $78.71 per barrel, driven by ongoing concerns about supply disruptions in the Middle East.
Meanwhile, in the precious metals market, spot gold increased by 1.59% to $2,419.29 an ounce, with U.S. gold futures up 0.81% to $2,409.80 an ounce, reflecting continued investor interest in safe-haven assets amidst the global economic uncertainty.