Wall Street reverses early advance

Tuesday 21:00 BST. Global stocks put in mixed performances while the dollar recouped some of the sharp losses it incurred after Friday's dismal US jobs report prompted many in the markets to push back expectations of when the Federal Reserve might raise interest rates.

In New York, the S&P 500 reversed an initial rise to end 0.2 per cent lower at 2,076. That left the US equity benchmark 1.9 per cent shy of the record closing high it reached in early March.

European shares put in a stronger showing as bulls were encouraged by FedEx's €4.4bn acquisition of Dutch rival TNT Express. The FTSE Eurofirst 300 index jumped 1.6 per cent to its highest close in more than seven years.

The Nikkei 225 in Tokyo rose 1.3 per cent to a two-week high, while the Shanghai Composite rose 2.5 per cent to its best level since March 2008.

Last week's employment report showed that just 126,000 jobs were created in the US last month, bringing a 12-month run of 200,000-plus readings to an end.

"Since Thursday, financial markets appear to be pricing in a bullish combination of data weakness adding enough uncertainty to allow the Fed to keep zero interest rate policy a little longer, while the data will probably rebound," said Hans Mikkelsen, credit strategist at BofA-Merrill Lynch.

Indeed, there was some reassurance on Monday after the Institute for Supply Management's March index of service sector activity matched expectations, with both the new orders and employment components improving.

Further good news on the US employment front came on Tuesday from the Job Openings and Labour Market Survey , which showed that total job openings rose to a post-recession high in February.

Nevertheless, markets will be keen to see whether the weaker tone of much of the US economic data released in the first quarter continues.

"If our view that first quarter weakness in GDP growth is primarily caused by temporary factors is correct, payrolls should pick up again to an above-200,000 pace on average over the next few months," said Signe Roed-Frederiksen, senior analyst at Danske Bank.

"This would leave the Federal Open Market Committee on track to deliver a first rate hike in September."

Others were more cautious following the payrolls data, however.

"One doesn't want to overstate the importance of one number but it certainly does help our longstanding view that the Fed will struggle to raise rates in 2015," said Jim Reid, macro strategist at Deutsche Bank.

In the currency markets , the dollar index - which fell as low as 96.39 on Friday - rallied 1.2 per cent to 97.88, as the US currency rose 0.7 per cent against the yen to Y120.32 and the euro fell 0.9 per cent to $1.0822.

The yield on the more policy-sensitive two-year US government bond rose 2bp to 0.52 per cent, well clear of its post-payrolls low of 0.47 per cent. But the 10-year Treasury yield slipped 2bp to 1.88 per cent.

The Australian dollar stood out after the country's central bank caught the markets by surprise by leaving interest rates unchanged. The "Aussie" rose 0.7 per cent against its US namesake to $0.7638.

But many felt a rate cut was still on the cards. "We expect the Reserve Bank of Australia to lower the official cash rate by 25bp to 2 per cent in May, followed by another 25bp easing to 1.75 per cent in the third quarter of this year," said Roy Teo, senior FX strategist at ABN Amro.

"Failure to do so will result in a stronger than desired Australian dollar and slower pace of rebalancing the economy."

Further support for the Aussie came from better than expected retail sales data for February.

There was some positive news on the eurozone economy too, as the service sector purchasing managers' index rose for a fourth successive month in March - although the final reading was a shade down from the initial estimate.

Furthermore, concerns about deflation in the region eased after data showed the year-on-year fall in producer prices narrowing to 2.8 per cent in February from 3.5 per cent.

But Greece remained a concern for European investors amid nagging uncertainty over whether Athens can secure vital financial aid from its creditors. The yield on Greek 10-year sovereign debt fell 22bp to 11.77 per cent, according to Reuters data, while the German Bund yield held steady at 0.18 per cent.

Oil markets had another volatile session, with an early fall for Brent crude to $57.02 a barrel turning into a 1.7 per cent rise as it settled at $59.10.

But the firmer dollar weighed on gold, with the metal down $4 at $1,209 an ounce.

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