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U.S. shares closed higher on Friday in the aftermath of the monthly report on U.S. labor market that helped spur the speculation of a rate hike next week.
The Dow Jones Industrial Average edged 0.21% higher at 20,902 while the S&P 500 and the Nasdaq Composite gained 0.33% and 0.39%, respectively after nonfarm payrolls for February beat expectations. However, closing the week, all three stock benchmarks were lower, trimming a six-week winning streak.
The Labor Department on Friday reported that employers added 235,000 jobs last month, which beat expectations for 200,000. January’s employment gains were revised up to 238,000 from the previously reported 227,000. Consequently, job gains averaged 209,000 per month over the past three months, well above the range from 75,000 to 100,000 which is needed to keep up with growth in the working-age population.
Better-than-expected U.S. job report buoyed expectations of a March rate hike grew to its highest level. According to CME’s Fed Watch Tool, 88.6% of traders expect a rate hike in March, compared to just 80% of traders on Monday.
The Federal Reserve is schedule to hold its two-day meeting on March 14-15 and is highly expected to raise the fed funds target range by a quarter point to a range between 0.75%-1%. After the Fed’s statement, Fed Chair Janet Yellen will to hold a 30-minute press conference.
Besides Fed’s closely-watched meeting, U.S. economic calendar also features data on Producer Price Index on Tuesday, retail sales and inflation on Wednesday, building permits on Thursday and consumer sentiment on Friday.
Yen ended Friday higher against the dollar, pushing the pair USDJPY down 0.15% to 114.80 late Friday. However, the currency lost ground versus its American counterpart for a second week. The pair rose roughly 0.6% on a weekly basis after reaching a peak of 115.51 on Friday, the highest level since January 19.
The Bank of Japan is anticipated to keep its short-term policy interest rate at minus 0.1% when it releases its latest rate decision and monetary policy statement on Wednesday. The BOJ may also hold the 10-year government bond yield target at around 0%, while maintaining the net amount of Japanese government bonds it buys annually at around 80 trillion yen, as it waits for more evidence of a modest economic recovery. BOJ Governor Haruhiko Kuroda’s press conference will come afterwards.
British Pound closed the week near the lowest level in nearly two months. During a press conference in Brussels, U.K. Prime Minister Theresa May confirmed that Britain would start exit negotiations with the European Union by the end of this month as planned.
Tracing monetary policy announcements of the FED and the BOJ, the Bank of England will announce its rate decision on Thursday, with market forecasting no change in policy. The BOE is expected to stand on a neutral zone on whether to cut or raise interest rates given uncertain developments of the formal process for separating Britain from the European Union by the end of March, despite the fact that the BOE raised its forecasts for growth and inflation last month.
In addition to the BOE, investors will be looking to on monthly unemployment figures due on Wednesday for further indications on the continued effect that the Brexit decision is having on the economy.
The euro reached a more than four-week high against the U.S. dollar on Friday after a report that the European Central Bank had discussed the possibility of raising interest rates before the end of its quantitative easing program.
Crude oil hit three-month lows on Friday, pressed down by another big rise in U.S. crude inventories to record highs and another report that showed U.S. rigs continued to surge higher. U.S. WTI crude settled down 1.6 percent, to $48.49 a barrel, while Brent crude ended down 1.6 percent, to $51.37 a barrel after oil services firm Baker Hughes late Friday said U.S. drillers added oil rigs for an eighth week in a row.
Baker Hughes said drillers added eight oil rigs in the week to March 10, bringing the total count up to 617 which was almost twice as much as the number of rigs recorded one year ago at 386 rigs. This was also the highest level since September 2015.