Shares find support in Asia as lower rates priced in
A buy-the-dip mentality led to a bounce in Wall Street and European stock futures, and allowed the dollar to stabilise after Friday's payrolls-induced retreat.
Treasuries ran into some profit-taking after their huge gains but fund futures still imply an 85% chance the Federal Reserve will cut rates in September, and ease by 100 basis points or more by this time next year.
The prospect of a shift in rates was the only silver lining to a dire payrolls report in which downward revisions left the three-month average of jobs growth at 35,000 from 231,000 at the start of the year.
"The report brings payroll growth closer in line with big data indicators of job gains and the broader growth dataset, both of which have slowed significantly in recent months," said analysts at Goldman Sachs.
"Taken together, the economic data confirm our view that the U.S. economy is growing at a below-potential pace."
Neither did the reaction of President Donald Trump instil confidence, as the firing of the head of Labor Statistics threatened the credibility of U.S. economic data.
Likewise, news that Trump would get to fill a governorship position at the Federal Reserve early added to worries about the politicisation of interest rate policy.
Analysts assume the appointee will be loyal to Trump alone, though the president did grudgingly concede that Fed Chair Jerome Powell would probably see out his term.
"It opens the prospect of broader support on the Fed Board for lower rates sooner rather than later," said Ray Attrill, head of FX research at NAB.
"Fed credibility, and the veracity of the statistics on which they base their policy decisions, are both now under the spotlight."
Markets have essentially already eased for the Fed, with two-year Treasury yields down almost 25 basis points on Friday in the biggest one-day drop since August last year.
The drop in global yields seemed to help equities, with S&P 500 futures and Nasdaq futures both bouncing 0.4%. EUROSTOXX 50 futures gained 0.6%, while FTSE futures rose 0.5% and DAX futures 0.4%.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab firmed 0.6%, aided by a 0.8% rally in South Korea (.KS11), opens new tab stocks.
Japan's Nikkei (.N22%), opens new tab fell 1.6%, in part weighed by Friday's rebound in the yen, while Chinese blue chips were flat.
Wall Street has taken comfort in an upbeat results season. About two-thirds of the S&P 500 have reported and 63% have beaten forecasts. Earnings growth is estimated at 9.8%, up from 5.8% at the start of July.
Companies reporting this week include Disney (DIS.N), opens new tab, McDonald's (MCD.N), opens new tab, Caterpillar (CAT.N), opens new tab and some of the large pharmaceutical groups.
The dismal U.S. jobs data did put a dent in the dollar's crown of exceptionalism, snuffing out what had been a promising rally for the currency.
The dollar was a shade firmer at 147.69 yen , having shed an eye-watering 2.3% on Friday, while the euro held steady at $1.1583 after bouncing 1.5% on Friday.
The dollar index was pinned at 98.727 , having been toppled from last week's top of 100.250.
Sterling was restrained at $1.3282 as markets are 87% priced for the Bank of England to cut rates by a quarter point at a meeting on Thursday.
The BoE board itself is expected to remain split on easing, while markets still favour two further cuts by the middle of next year.
In commodity markets, gold was flat at $3,361 an ounce , having climbed more than 2% on Friday.
Oil prices extended their latest slide as OPEC+ agreed to another large rise in output for September, which completely reverses last year's cuts of 2.2 million barrels per day.
Brent dropped 0.2% to $69.51 a barrel, while U.S. crude fell 0.1% to $67.24 per barrel.
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