Global stocks traded around record highs Thursday, and the dollar held firm after a surprisingly strong U.S. jobs report dented expectations for near-term rate cut expectations, with a slew of major companies set to report earnings in Europe.

The U.S. economy created almost twice as many jobs in January as expected, Wednesday's report showed, allaying some concern over a softening labor market and keeping alive expectations for another couple of U.S. rate cuts this 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 0.5%, 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 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 labor 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 at 3.508% 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 dollar would need more such positive surprises in data to sustain the rebound.

MIXED 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.

Inflation data is due on Friday and will be the next test for market views on interest rate cuts.

YEN GETS A BOOST

The yen extended this week's rise, as investors warm to the view that the new government will be fiscally responsible and Japan's finances may be favorable in the long run.

The yen has rallied 2.7% this week to 152.95 per dollar, well below the peak for the U.S. currency at 157.95 on Monday.

"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 was steady at $1.1883, as was the pound at $1.364, after data showed the UK economy barely grew in the final quarter of 2025.

Gold was down 0.3% at $5,065 an ounce, after rising over 1% in the previous session.