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Washington - US stocks rose with the dollar while Treasuries maintained declines after unexpectedly strong hiring data bolstered confidence in the strength of the American economy. Crude fell below $45 a barrel.
Broad-based payroll gains that topped estimates boosted sentiment among equity investors a day after stocks suffered the biggest drop in six weeks.
The Bloomberg Dollar Spot Index briefly erased gains as tepid wage growth stoked concern that inflationary pressure remains weak as the Federal Reserve signals its intent to tighten monetary policy. The 10-year Treasury yield climbed to 2.39 percent. Gold futures turned lower.
The hiring report bolstered the Federal Reserve’s stance that recent signs of labor market sluggishness are transitory, though the tepid wage gains gave fuel to arguments that weakness remains. While stocks advanced on the perceived economic strength, the dollar and Treasury markets focused on the implications for the Fed’s next rate hike.
Janus Henderson’s Bill Gross told Bloomberg Radio that he expects the central bank to go through with a third increase this year, likely in December.
“What this should do is to keep the Fed for another rate hike,” Quincy Krosby, a market strategist at Prudential Financial, said by phone. “The market has absorbed the fact finally that Janet Yellen is seemingly intent on moving toward a neutral rate.
If this were a weak number, the market could be down because again the notion would be that she’s raising rates in an environment in which the economy is pulling back.”
Bond yields have climbed around the world after a sell-off in debt this week stoked by a number of central banks stepping up talk of tighter policy conditions. The yen slumped to an eight-week low after the Bank of Japan stepped in to curb the rise in rates.
Bearish comments from investors Jeffrey Gundlach and Ray Dalio added to the impression of a sea change for bonds, with German 10-year yields climbing to an 18-month high as Treasuries also slipped.
Here’s what’s coming up:
The G-20 summit in Hamburg takes place on Friday. US President Donald Trump is expected to hold his first meeting with Russia’s Vladimir Putin as well as meet his Chinese counterpart Xi Jinping. A Fed monetary policy report is due to be presented to Congress ahead of chair Janet Yellen’s testimony next week.
Here are the main moves in markets:
Stocks
The S&P 500 rose 0.3% at 15:32, bouncing back from a 0.9% slide. The measure is down 0.3% for the holiday-shortened week. The Stoxx Europe 600 index dropped 0.3%, paring a loss after the US hiring data. The gauge is flat this week, after four straight weekly declines. Emerging-market shares fell 0.3%.
Bonds
German 10-year yields climbed one basis point to 0.57% as of 14:36 after rising 9 basis points on Thursday. French benchmark yields were two basis points lower.
The yield on 10-year Treasuries was flat after climbing four basis points on Thursday. Yields in the Bloomberg USD Emerging Market Sovereign Bond Index advanced 18 basis points to 4.81% this week, the most since the week ending November 18.
Currencies
The yen dropped 0.4% to 113.70 per dollar, reversing an earlier gain of 0.1%. The currency is down 1.1% for the week, heading for the biggest drop since the end of April.
The Bloomberg Dollar Spot Index rose 0.1% after dropping 0.3% on Thursday. The euro slipped 0.1% to $1.1408 after jumping 0.6% in the previous session, while the pound weakened 0.6% to $1.2897.
Commodities
West Texas Intermediate tumbled 3.1% to $44.09 a barrel, more than erasing Thursday’s 0.9% gain. Oil is down 4.2% for the week as a decline in US stockpiles failed to convince investors that global markets are rebalancing. Gold slipped 0.3% to 1 221.44 an ounce. The precious metal is down 1.6% for the week, its worst performance since early May.
Asia
The MSCI Asia Pacific Index declined 0.6%, for its biggest weekly loss since early March. Japan’s Topix index slipped 0.5%, its first weekly loss in a month. Australia’s S&P/ASX 200 Index lost 1%. South Korea’s Kospi dropped 0.3%. Hong Kong’s Hang Seng fell 0.3% and the Hang Seng China Enterprises Index lost 0.5%.
Australian 10-year yields rose 9 basis points to 2.73%, advancing for the eighth time in 10 sessions. Japan 10-year yields fell less than one basis point, to 0.088%. The central bank offered to buy debt with maturities of more than five years to 10 years, after yields on its benchmark 10-year securities more than doubled in the past week.
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