The US stock market rose to further highs on Thursday as investors awaited the Federal Reserve’s next move ahead of crucial jobs data on Friday.

The S&P 500 gained 0.5 per cent in New York, adding to recent records as traders weigh strong corporate earnings forecasts with concerns that the Fed will trim its monthly bond purchases that have underpinned asset prices throughout the pandemic. The technology-focused Nasdaq Composite index rose 0.1 per cent, having traded lower earlier in the day.

The dollar index, which measures the greenback against global peers, rose 0.1 per cent to its highest level since early April. That shift helped send sterling and the euro to two-month lows against the dollar at $1.3761 and $1.1846, respectively.

The moves came ahead of the monthly non-farm payrolls report on Friday, in which economists polled by Bloomberg expect to see employers added close to 700,00 jobs in June, up from 559,000 a month earlier.

“The only thing I think would surprise the markets if there is an ongoing miss, because we’ve had two misses in a row,” said Jurrien Timmer, director of global macro at Fidelity Investments. “It’s a question of how quickly employers are getting out there to hire workers and that’s an important cue for the Fed . . . because if they’re trying to normalise policy, but companies are still not hiring a lot of people, then that’s a sign that maybe they should hold on.”

Jay Powell, Fed chair, has pledged to keep monetary policy supportive until the labour market is healed from the shocks of the pandemic. At their last meeting, however, the central bank’s policymakers lifted their growth and inflation forecasts for the US and brought forward projections for the first post-pandemic rate rise by a year to 2023.

“The market could well get nervous” about a strong payrolls number, “given the relatively hawkish stance the Fed took last month”, said Lale Akoner, senior market strategist at BNY Mellon.

But investors were also primed to expect “Fed speak that . . . quickly puts unease to one side”, Akoner added, after central bank officials soothed investors’ nerves in the wake of their June meeting with reassurances that it was too soon to raise rates.

The yield on the benchmark 10-year Treasury bond, which has been pinned lower by the Fed’s bond purchases since last March, climbed to 1.45 per cent.

In Europe, the Stoxx 600 equity index closed up 0.6 per cent as traders sidestepped the complex outlook for US assets to focus on the eurozone’s nascent economic recovery from Covid-19 crisis.

Line chart of Indices rebased showing European energy companies track oil prices higher

Energy stocks topped the region-wide benchmark, as the price of Brent crude rose 1 per cent to a high of $75.38 a barrel. Analysts expected the group of oil-producing nations to only gradually increase production, even as economies around the world open up following the pandemic.

“The oil sector has been through a lot over the last seven or eight years,” said Sean Naughton, senior vice-president of US equities at RBC Wealth Management. “It’s been a tough space, but I think there has been a lot of improvements in the sector in terms of the amount of US shale production. That could keep supply under control. I do believe that demand is improving in the US and globally for incremental oil, so I think that there is a relatively good fundamental case on oil continuing to rise.”

The global oil benchmark hovered near its highest level since October 2018 while West Texas Intermediate, the US marker, rose 1.8 per cent to $74.75 a barrel.

For the most recent quarter, which ended on Wednesday, European stocks have trailed US markets, with the S&P 500 climbing 8.2 per cent against a 5.4 per cent rise for the Stoxx 600.

“Europe has lagged the US in terms of managing the virus and its economic recovery but it is doing better now, so it is attracting foreign capital while European investors are also looking internally,” said Olivier Marciot, cross-asset fund manager at Unigestion.

Eurozone gross domestic product contracted in the first three months of this year, while the US achieved quarterly growth of 1.6 per cent. The common currency bloc is expected to have returned to growth in the second quarter, however.

The European Central Bank is also seen by investors as likely to maintain its emergency bond purchasing programme for longer than its US counterpart. “Eurozone real GDP will be slightly outpaced by the US in 2022,” Jefferies strategist Sean Darby wrote in a research note.

“The ECB is going to be much later in tapering and tightening than the Fed.”