World shares rise, US dollar weakens on soft labor market data

By Chibuike Oguh

NEW YORK (Reuters) -World equities rose while the U.S. dollar fell on Wednesday following soft labor market data that buoyed investor expectations of Federal Reserve interest rate cuts later this year.

U.S. Labor Department data on Wednesday showed that initial claims for unemployment rose 238,000 the week that ended June 29, slightly above expectations and indicating a softening in labor market conditions.

MSCI's gauge of stocks across the globe rose 0.60% to 811.63, while Europe's broad STOXX 600 index added 0.81%.

"We have slowing growth but closer to trend, with the potential for the Fed to start cutting rates by maybe September, and earnings which have been still pretty good, that's a pretty good backdrop still," said Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers in Boston.

On Wall Street, the benchmark S&P 500 and Nasdaq were advancing with technology, utilities and materials stocks among the top gainers. Healthcare equities were pushing the Dow lower.

The Dow Jones Industrial Average fell 0.19% to 39,259.90, the S&P 500 gained 0.24% to 5,521.98 and the Nasdaq Composite gained 0.50% to 18,119.62.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.43% at 105.21, with the euro up 0.5% at $1.0798.

"From a seasonality perspective, the first two weeks of July tend to be good and we're kind of following those seasonal patterns in that the economic numbers continue to point to a slowing economy, not a slow economy, and everything else is still pretty supportive in here," Janasiewicz added.

Benchmark 10-year Treasury yields dipped following the jobless claims data as well as signs of weakness in manufacturing, as the ISM Non-Manufacturing index came in below expectations. The yield on benchmark U.S. 10-year notes fell 8.5 basis points to 4.351%.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.45% at 105.19, with the euro up 0.53% at $1.0801.

The yen sank to a fresh 38-year low against the U.S. dollar and a record trough versus the euro ahead of the July 4 holiday in the United States. The yen fell to 161.96 per dollar for the first time since December 1986.

Oil prices steadied after trading higher on a bigger than expected drawdown in U.S. crude stockpiles, while economic headwinds from China and the euro zone capped gains.

Brent crude futures edged up 0.16% to $86.40 a barrel, while U.S. West Texas Intermediate (WTI) crude futures gained 0.11% to $82.94.

Gold prices rose more than 1% to a near two-week high as the U.S. dollar weakened. Spot gold added 1.42% to $2,362.46 an ounce, while U.S. gold futures gained 1.66% to $2,361.60 an ounce.

(Reporting by Chibuike Oguh in New York; Editing by Josie Kao)

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