The dollar hit a two-month low yesterday after disappointing US private-sector job growth reinforced expectations the Federal Reserve will maintain its loose monetary policy, while oil prices slid more than three per cent as the latest data added to concerns about global growth.
Oil fell sharply after manufacturing data from both the United States and China, the world’s two biggest energy consumers, raised new doubts about the strength of the global economy. Brent crude slid below $100 a barrel for the first time since April 23.
The weak US data also drove US Treasury yields down, with the benchmark 10-year note yield hitting the lowest intra-day level so far this year.
Payroll processor ADP reported that private employers added 119,000 jobs in April, well below economists’ expectations for 150,000 new jobs.
The dollar index, which measures the US currency’s value against a basket of currencies, dropped as low as 81.331, its weakest level since February 25. It was last at 81.551, down 0.2 per cent.
World stock markets were mostly lower. US stocks fell, one day after the S&P 500 posted both record intraday and closing highs, hurt by the jobs data and separate data showing the pace of US manufacturing growth slowed in April. Lower-than-expected sales from drug maker Merck & Co Inc dragged on the Dow, with Merck shares down two per cent at $46.05.
The Dow Jones industrial average was down 89.96 points, or 0.61 per cent, at 14,749.84. The Standard & Poor’s 500 Index was down 9.73 points, or 0.61 per cent, at 1,587.84. The Nasdaq Composite Index was down 23.37 points, or 0.70 per cent, at 3,305.42.
“Basically, we’ve had six weeks of weakening data, but I think this may be a speed bump rather than a trend,” said Jack De Gan, chief investment officer of Harbor Advisory. “If we can overcome this by the end of the day, we are breaking out of an old high and heading into a new.”
MSCI’s world equity index was down 0.3 per cent, while Britain’s FTSE 100 was up 0.4 per cent, led by gains in banks on expectations of further monetary easing by the European Central Bank when it meets today. The Paris and Frankfurt stock markets were closed for the May Day holiday.
In the US Treasury market, prices rose after the ADP report, which was the latest piece of evidence to suggest slower US economic growth.
The benchmark 10-year Treasury note US10YT=RR was up 16/32, its yield easing 1.619 per cent, the lowest intra-day level so far this year. The Federal Reserve is widely expected to maintain its monthly purchases of $85 billion in bonds as it looks to support an economic recovery that is nearly four years old but still too weak for the job market to truly heal.
With inflation also slipping, Fed officials could again find themselves in the uncomfortable position of having to shift from talk of curbing stimulus to the possibility of doing more.
Today, the ECB is expected to cut its main interest rate to a record low of 0.5 per cent.
Economists are eyeing whether the ECB can do more. The central bank lacks the aggressive policies many of its major peers are using, and the mismatch in approaches, as well as the dollar’s weakness, has kept upward pressure on the euro.
With the May Day holiday curbing trading, the euro rose 0.2 per cent to $1.3188. It earlier rose to $1.3242, according to Reuters data, its highest level since February 25.
Oil prices slid as the fresh concerns over economic growth in China and the United States and a build-up of US crude inventories weakened the demand outlook. Brent crude futures were down $3.10 at $99.27 a barrel. U.S. oil was down $2.95 at $90.51.
Gold prices also were down sharply, with spot gold falling more than two per cent to $1,442.94.