GLOBAL MARKETS-Stocks near record highs after bullish US jobs data; dollar sags

Global stocks traded around record highs on ​Thursday after a surprisingly strong U.S. jobs report eroded near-term rate cut ‌expectations, ​while caution ahead of inflation data at the end of the week dented the dollar. The U.S. economy created almost twice as many jobs in January as expected, Wednesday's report showed, allaying some concern over a softening labour market.

While the data caused traders to push back expectations for Federal Reserve rate cuts in ‌the next few months, revisions showing payroll growth all but stalled last year helped keep alive expectations for easing later in the year. MSCI's All-World index, which has gained nearly 4.5% this year, was up for a fifth day and nudging at Wednesday's record high.

Europe's STOXX 600 was up 0.4%, also at all-time highs, after positive earnings from luxury retailer Hermes and French digital building infrastructure group Legrand. This month, investor confidence has been shaken by a ‌series of selloffs in sectors including asset managers, insurers and hardware and software makers, on concern over AI's potential to disrupt those industries.

RETURN TO MACRO BASICS A RELIEF A return to macroeconomic basics delivered some ‌much-needed relief for financial market participants.

Market expectations for a Fed rate cut of at least 25 basis points in March had risen to about 20% before the jobs data, but retreated to about 5%, according to CME's FedWatch Tool. Thomas Mathews, head of markets for Asia-Pacific at Capital Economics, said the big picture was that labour market conditions may be tightening.

"If so, investors may be overestimating the case for further easing, and Treasuries could be in for a bit more pain." Two-year U.S. Treasury yields, which typically track Fed ⁠rate expectations, were ​steady at 3.506% after jumping nearly 6 basis points ⁠on Wednesday, the biggest daily increase since October.

Higher yields helped keep the dollar steady. Still, analysts said uncertainties over Fed independence and policy risks suggested the currency would need more such positive surprises in data to sustain the rebound. 'GOOD AND BAD NEWS' FOR THE ⁠DOLLAR "There is good and bad news for the dollar after yesterday’s payrolls. The good one is intuitive: job numbers were good," ING strategist Francesco Pesole said.

The bad news, he said, was that the dollar should have rallied more strongly on ​the back of those numbers, not least because of the pickup in short-term yields. "We instead read that as a sign markets remain minded to sell dollar rallies on the back of ⁠longer-term considerations. This means the bar for a dollar recovery is higher: more good data is needed, for a start," he said.

The dollar rose as much as 0.4% against a basket of currencies following the payrolls numbers, only to end the day virtually unchanged. It ⁠also ​erased early gains on Thursday to trade broadly flat. U.S. inflation data is due on Friday and will be the next test of market views on interest rate cuts.

FISCALLY RESPONSIBLE GOVERNMENT BOOSTS YEN The yen held on to most of this week's 2.7% rise, as investors warm to the view that the new government will be fiscally responsible and Japan's finances may be favourable in the long run.

It was last a ⁠touch lower on the day, leaving the dollar up 0.1% at 153.44 yen, but below Monday's peak at 157.95. "Yen shorts are collectively reassessing positions, although at this stage the bearish trend in JPY that ⁠started in early 2025 looks more like a reversion ⁠to the mean than the start of a structural bull market," said Chris Weston, head of research at Pepperstone.

"That said, traders need to stay open-minded as the macro picture evolves." The euro edged up, to $1.1881, as did the pound, which traded at $1.365, shrugging off data on Thursday that showed the UK economy barely grew in ‌the final quarter of 2025.

Gold ‌was down 0.35% at $5,060 an ounce, after rising more than 1% in the previous session. (Additional reporting by Ankur ​Banerjee in Singapore; Editing by Bernadette Baum, Kirsten Donovan)