The US dollar and government debt yields jumped yesterday after strong gains in hourly wages unveiled in the US government’s jobs report for September boosted the likelihood the Federal Reserve will raise interest rates by year’s end.
US employment fell in September for the first time in seven years as Hurricanes Harvey and Irma temporarily displaced workers and delayed hiring, the latest sign the storms undercut economic activity in the third quarter.
Average hourly earnings increased 12 cents, or 0.5 per cent, in September after rising 0.2 per cent a month earlier. The gains came as nonfarm payrolls fell by 33,000 jobs last month against expectations of a jobs gain of 90,0000.
The yield on two-year US Treasury notes soared to their highest in nine years, while the dollar hit an almost three-month high against the Japanese yen and almost a two-month high against the euro.
The dollar index, tracking the greenback against a basket of key currencies, fell 0.11 per cent, with the euro up 0.18 per cent to $1.1731. The Japanese yen weakened 0.07 per cent versus the greenback at 112.90 per dollar.
Benchmark 10-year notes fell 7/32 in price to yield 2.3733 per cent, paring losses that earlier had sent yields above 2.4 per cent.
The jobs report tempered equity markets that had rallied all week with MSCI’s world stock index and the three major US gauges on Wall Street setting four successive record closing highs.
However, the report should be taken with a large grain of salt as the jump in wages is likely to show near equal weakness in October.
Meanwhile, the Dow Jones Industrial Average fell 27.57 points, or 0.12 per cent, to 22,747.82. The S&P 500 lost 6.85 points, or 0.27 per cent, to 2,545.22 and the Nasdaq Composite dropped 9.68 points, or 0.15 per cent, to 6,575.67.
The pan-European FTSEurofirst 300 index lost 0.43 per cent and MSCI’s gauge of stocks across the globe shed 0.24 per cent.
Spot gold added 0.3 per cent to $1,271.60 an ounce.
Oil prices fell around two per cent and were set to end Brent’s longest multi-week rally in 16 months following profit taking and the return of oversupply concerns.
Brent was last at $55.21 per barrel, down 3.14 per cent on the day, while US crude fell 3.27 percent to $49.13.