LONDON World shares saw their biggest jump in over a month on Monday and the dollar slipped, after weaker-than-expected U.S. jobs figures gave investors another excuse to push back Federal Reserve interest rate rise expectations.
European shares .FTEU3 touched a four-month high led by mining and oil firms as crude prices LCOc1 jumped more than 3 percent for the second straight session in the commodity markets.
Benchmark bonds US10YT=RRDE10YT=TWEB were also back in favour amid the waning Fed bets, while emerging market stocks .MSCIEF were headed for their best day since early July as the Fed and hot oil combination saw them soar 1.3 percent. [EMRG/FRX]
"We don't expect the Fed to do anything until next year so that lays the ground for further advances," said TD Securities strategist Paul Fage.
Though the Fed reaction and oil price surge were the markets' main drivers, they were not the only factors in play.
The yen added to the dollar's pressures as the head of the Bank of Japan disappointed investors who had expected clearer signals that Tokyo's monetary policy would be eased further this month.
Though Haruhiko Kuroda signalled its already massive stimulus programme would continue, there was nothing explicit enough to suggest an expansion is imminent.
The dollar dropped 0.7 percent to 103.27 yen JPY= having gained more than 4 percent against the Japanese currency in the last six days. The euro EUR= nudged up 0.2 percent.
UBS's head of currency strategy Constantin Bolz said the factors that had driven the dollar higher - growing expectations of a Fed hike in September, bets on imminent further BOJ easing, and increased risk appetite - had faded somewhat, but that a fall-back was not surprising given the rapidity of the move.
"We shouldn't forget that we were at 100 yen ten days ago," Bolz said.
Britain's sterling also did damage to the dollar. It hit a one-month high of 1.3360 GBP= against the greenback as data showed the UK services industry bounced back strongly from a seven-year low hit after the vote to leave the European Union.
The Markit/CIPS Purchasing Managers' Index (PMI) jumped to 52.9 in August from July's 47.4. It was the biggest one-month gain in the survey's 20-year history and one which beat all forecasts in a Reuters poll.
"It remains too early to say whether August's upturn is a dead cat bounce or the start of a sustained post-shock recovery," IHS Markit economist Chris Williamson said.
"But there's plenty of anecdotal evidence to indicate that the initial shock of the June vote has begun to dissipate."
The sharp rise in oil prices came amid renewed speculation that major producers including Saudi Arabia and Russia could cooperate to tackle weak prices and rein in oversupply.
Brent crude futures for November delivery were last up $1.93 per barrel at $48.75 a barrel at 0945 GMT and U.S. crude for October delivery was up $1.60 a barrel at a session high of $46 a barrel.
Saudi energy minister Khalid al-Falih will make a "significant announcement" at a news conference at 0930 GMT at the G20 summit currently being held in Hangzhou in China.
This comes after Saudi deputy crown prince told Russian President Vladimir Putin on the sidelines of the same summit that cooperation between the two countries would bring benefit to the global oil market. (Full Story)
"Verbal intervention was again needed to trigger a recovery towards $50," senior ABN Amro economist Hans van Cleef said.
In Asia overnight, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS ended up 1.6 percent, while Japan's Nikkei .N225 rose 0.7 percent to its highest close since May 31.
Friday's U.S. jobs report showed non-farm payrolls rose by 151,000 jobs in August after an upwardly revised 275,000 increase in July. Economists polled by Reuters had expected a rise of 180,000.
U.S. Fed Funds futures prices indicated investors were now pricing in around a 20 percent chance of a September hike down from over 30 percent before the jobs data. It remains at more than 60 percent by the end of year.
"What matters is not whether the markets think that was a strong jobs number, but whether Fed policymakers do," said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities in Tokyo.
Richmond Federal Reserve Bank President Jeffrey Lacker said on Friday that the U.S. economy appears strong enough to warrant significantly higher interest rates.
(Additional reporting by Lisa Twaronite in Tokyo, Ahmad Ghaddar in London)