The US economy added just 57,000 jobs in June, the Labour Department reported on Thursday, missing the 100,000 forecast and accompanied by downward revisions for April and May. The data triggered an immediate repricing of Federal Reserve policy expectations and fuelled a broad rally across Asian equity markets on Friday. South Korea’s Kospi, which had plunged nearly 8% in the previous session, closed 5.8% higher as investors rushed back into beaten-down semiconductor shares. Japan’s Nikkei 225 rose 1.5%, Hong Kong’s Hang Seng added 1.3% and Australia’s S&P/ASX 200 gained 1.4%.

The weaker-than-expected payrolls figure cooled speculation that the Fed would raise interest rates in the coming months. Fed funds futures now imply a 46.8% probability that the central bank holds rates steady at its September meeting, up from 35.8% a day earlier, according to CME Group’s FedWatch tool. Analysts at Westpac wrote that the numbers "challenged the narrative that the Fed remains on track to hike in the second half of this year." Lower rate expectations relieve pressure on equity valuations, particularly for high-growth technology stocks that had been sold off amid concerns over stretched AI-related valuations and a recent spike in global inflation driven by oil price jumps linked to the Iran conflict.

The rotation was most pronounced in Seoul, where Samsung Electronics surged 8.2% and SK Hynix jumped 10.9%, partially reversing steep losses that had pushed the Kospi roughly 20% below its mid-June record. In Tokyo, memory maker Kioxia gained 9.2%, though chip-equipment firm Tokyo Electron slipped. European markets extended gains, with the pan-European STOXX 600 touching a record high before settling, as investors rotated into industrials and basic materials. The dollar weakened against the yen and the euro, while gold climbed 1.4% to near $4,180 an ounce, benefiting from the lower rate environment. US markets were closed for the Independence Day holiday, leaving the full global reaction to be tested when trading resumes on Monday.

Attention now turns to the Fed’s September policy meeting and incoming inflation data. In London, analysts at TD Securities warned that shipping disruptions caused by the Strait of Hormuz closure continue to work through supply chains, potentially keeping price pressures elevated. The next US consumer price index release will be scrutinised for any evidence that core inflation is reaccelerating, a scenario that could revive rate hike bets.