Global stock index sinks with dollar, bond yields after weak US jobs data
NEW YORK/LONDON -MSCI's global equities index fell on Friday and the dollar took a dive after weaker than expected U.S. jobs data ramped up expectations for Federal Reserve rate cuts in September as investors also considered U.S. President Donald Trump's latest tariff announcements.
U.S. Treasury yield moved sharply lower after the Labor Department reported that the U.S. economy added 73,000 nonfarm payrolls last month, below the 110,000 expected by economists surveyed by Reuters. July unemployment rose up to 4.2%. June's job growth was revised sharply lower to 14,000 from 147,000.
After the data, traders were betting on a 69% probability for a September rate cut compared with 37.7% on Thursday, according to CME Group's FedWatch tool.
"The market is reacting to the possibility of the economy flipping into recession. The weak jobs data is piling on to weak earnings reports and weak guidance from some corporations," said Luke Tilley, Chief Economist, Wilmington Trust.
But Tilley said perspective is also important when looking at Friday's moves since the market has risen sharply since around mid-April when Trump announced tariff pauses.
Investors may be "repositioning around what had been a really strong run and just taking some chips off the table in light of this morning's data," he said.
On Wall Street at 11:32 a.m. the Dow Jones Industrial Average fell 640.77 points, or 1.46%, to 43,488.20, the S&P 500 fell 105.82 points, or 1.66%, to 6,233.84 and the Nasdaq Composite fell 459.00 points, or 2.17%, to 20,663.45.
The pan-European STOXX 600 index fell 1.81%, suggesting its biggest daily drop since April 9. MSCI's gauge of stocks across the globe fell 12.34 points, or 1.33%, to 917.28, putting it on track for its biggest daily drop since mid-April.
The softer data added to losses for the global index , which was already losing ground after a host of tariff announcements from Trump the day before.
Trump ordered tariffs ranging from 10% to 41% on U.S. imports from several major trading partners. He increased duties on Canadian goods to 35% from 25% for all products not covered by the U.S.-Mexico-Canada trade agreement. He said a 25% rate for India's U.S.-bound exports, 20% for Taiwan's, 19% for Thailand's and 15% for South Korea's. However, Mexico got a 90-day reprieve from higher tariffs to allow for deal talks.
In currencies, the greenback reversed course to fall sharply after the data due to increased expectations for rate cuts. Earlier it had found support in fading hopes for U.S. rate cuts.
The dollar index <=USD>, which measures the greenback against a basket of currencies including the yen and the euro, fell 1% to 99.03.
The euro was up 1.11% at $1.1542 while against the Japanese yen , the dollar weakened 1.76% to 148.08. The Bank of Japan held interest rates steady on Thursday and revised up its near-term inflation expectations, but Governor Kazuo Ueda sounded a little dovish in the press conference.
Sterling strengthened 0.32% to $1.3247 and the Canadian dollar strengthened 0.44% versus the greenback to C$1.38 per dollar.
U.S. Treasury yields plunged after the jobs data and the increase in bets that the Fed will resume interest rate cuts in September.
The yield on benchmark U.S. 10-year notes fell 11.9 basis points to 4.241%, from 4.36% late on Thursday while the 30-year bond yield fell 6.6 basis points to 4.8191%.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 21.6 basis points to 3.733%, from 3.951% late on Thursday.
In energy markets, oil prices fell more than 2% after the jobs data and on the prospects of a possible increase in production by OPEC and its allies. Oil had settled 1% lower on Thursday.
U.S. crude fell 2.66% to $67.42 a barrel and Brent fell to $69.72 per barrel, down 2.76% on the day.
Elsewhere, gold prices rallied to a one-week high, after the weak jobs report boosted policy easing expectations and fresh tariff announcements also spurred safe-haven demand.
Spot gold rose 1.83% to $3,350.10 an ounce.
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