LONDON (Reuters) -Global stocks edged back from all-time highs on Friday and U.S. government debt yields jumped after unexpectedly strong U.S. monthly jobs data doused hopes the Federal Reserve would soon follow euro zone and Canadian interest rate cuts.
The world’s largest economy added 272,000 new jobs last month, beating the 185,000 new hires predicted by economists and derailing an investor consensus that the jobs market had slackened by just enough to push consumer prices lower.
MSCI’s world share index fell 0.2% after touching a record level on Thursday. Futures markets implied a cautious stock market open in New York as contracts on the S&P 500 share index fell 0.6%, with U.S. Treasuries taking most of the pain from a monthly non-farm payrolls report that markets read as inflationary.
The benchmark 10-year U.S. Treasury yield, a benchmark for borrowing rates globally, was 13 basis points (bps) higher on the day after the jobs report at 4.4%.
The two-year yield, which tracks interest rate expectations, rose by the same amount to 4.846%, following six straight days of declines until Thursday. Bond yields rise as prices fall.
Money market pricing just after the payrolls data implied traders saw the Fed only starting to cut rates from their 23-year high of 5.25-5.5% by November.
A September move had been strongly expected earlier in the day, particularly after the European Central Bank made a widely expected decision to cut its deposit rate from a record 4% to 3.75% on Thursday.
“This is a strong report, and it suggests that there are no signs of any cracks in the labour market,” Spartan Capital Securities chief economist Peter Cardillo said.
“It’s a plus for economy and a plus for corporate earnings but it’s a negative in terms of the prospects of a rate cut perhaps as early as September.”
The Bank of Canada on Wednesday became the first G7 nation to trim its key policy rate, following cuts by Sweden’s Riksbank and the Swiss National Bank.
The non-farms report also saw euro zone rate pricing go into reverse, with traders now pricing 55 bps of cuts in the region this year, from 58 bps before the data.
Europe’s Stoxx 600 share index, which has gained almost 10% year-to-date, moved from trading flat for most of Friday into a 0.6% loss on the day.
Euro zone bonds were also lacklustre on Friday, with Germany’s 10-year Bund yield rising 7 bps to 2.617%.
Elsewhere, the dollar rose 0.6% against a basket of currencies, having been set for a weekly loss before the jobs data. The euro dropped 0.5% to $1.083 following a slight gain in the previous session.
Brent crude oil futures rose 0.3% to $80.13 per barrel. Spot gold dropped 2.5% to $2,317.78 an ounce.
Source: Economy - investing.com
