Expectations of more Greek debt drama drove European stocks lower yesterday as German Bunds posted their worst weekly losses since 1999, while a sharp pick-up in US jobs growth led the dollar to a 13-year high against the yen.
Uncertainty over Greece weighed on sentiment in Europe, but a surprisingly strong US labour market report for May pared European equity losses and lifted Treasury yields. Wall Street cut its losses after opening lower.
Nonfarm payrolls jumped 280,000 last month, the largest gain since December, while payrolls for March and April were revised to show 32,000 more jobs were created than previously reported, the Labour Department said.
A gain in average hourly earnings and the surge in jobs growth raised the chances the Federal Reserve would tighten monetary policy this year. Traders are now betting the Fed will start raising interest rates as soon as October.
US benchmark Treasury debt yields jumped to their highest since October, with yields on two-year notes hitting a more than four-year peak, and five-year yields touching a six-month high.
The benchmark 10-year US Treasury note fell 22/32 in price to yield 2.3896 per cent. Earlier they touched an eight-month peak of 2.442 per cent.
German 10-year yields, the benchmark for eurozone borrowing costs, were higher at 0.85 per cent. The widely watched 10-year shed almost three per cent of its value this week, the biggest weekly loss since the euro’s inception in 1999.
MSCI’s all-country world stock index fell 0.74 per cent, while the pan-European FTSEurofirst 300 index closed down 0.88 per cent to 1,543.56.
On Wall Street, stocks hovered near break-even. The Dow Jones industrial average fell 26.29 points, or 0.15 per cent, to 17,879.29. The S&P 500 slid 0.55 points, or 0.03 per cent, to 2,095.29 and the Nasdaq Composite added 3.13 points, or 0.06 per cent, to 5,062.25.
The dollar rallied to a 13-year peak against the yen and rose sharply against the euro on the accelerating US job growth. It rose more than one per cent against the euro, yen, and Swiss franc.
The greenback hit 125.740 yen, while the euro turned sharply lower after rallying this week.
The euro was last down 1.08 per cent against the dollar at $1.1116. The dollar was last up 0.93 per cent against the yen at 125.52 yen.
Greece delayed repayment of an IMF loan yesterday and a deputy minister said Athens might call snap elections to break an impasse with lenders.
Oil traded near break-even in volatile trade, with Brent briefly hitting seven-week lows before paring losses. The surging dollar and an Opec decision not to cut output in an oversupplied market sent crude prices on a roller-coaster ride.