NEW YORK: The US dollar and bond yields jumped on Friday while stock markets fell as US data showed the strongest annual wage growth since 2009, raising the specter of accelerating inflation and more US interest rate hikes than expected this year.
Yields on the 10-year US Treasury note shot up to a four-year high within five minutes of release of the Labor Department’s unemployment report for January.
The dollar surged against the Japanese yen, euro and a basket of six currencies.
The price of the benchmark 10-year Treasury note later fell further, pushing the yield up to 2.8525 percent from 2.773 percent late on Thursday.
Stocks in Europe and on Wall Street plunged at least 1 percent on the news, as the strong jobs and wage growth data boosted the chances of four Fed rate hikes this year, instead of the three hikes analysts had expected thus far.
“What is good for the average American worker ends up being negative for stocks because it increases the odds of further rate hikes,” Michael Antonelli, managing director of institutional sales trading at Robert W. Baird in Milwaukee.
MSCI’s all-country world index of equity performance in 47 countries fell 1.07 percent while its gauge of emerging market stocks lost 1.54 percent.
The pan-European FTSEurofirst 300 index of leading regional shares lost 0.98 percent and the STOXX 600 index tumbled 1.07 percent.
On Wall Street, the Dow Jones Industrial Average fell 291.39 points, or 1.11 percent, to 25,895.32. The S&P 500 lost 27.83 points, or 0.99 percent, to 2,794.15 and the Nasdaq Composite dropped 81.01 points, or 1.1 percent, to 7,304.85.
The dollar index, tracking the unit against a basket of major currencies, rose 0.72 percent, with the euro down 0.64 percent to $1.2428. The Japanese yen weakened 0.87 percent versus the greenback at 110.37 per dollar.
The US bond market’s gauges of inflation expectations added to their earlier rise on Friday as domestic wages recorded their strongest annual increase in more than 8-1/2 years, suggesting inflation may be accelerating.
The gap between 10-year Treasury Inflation Protected Securities (TIPS) and the 10-year Treasury notes reached its highest level since September 2014.
US crude fell $1.02 to $64.78 per barrel and Brent fell $1.34 to $68.31.
Spot gold dropped 1.4 percent to $1,329.62 an ounce.
Source: Brecorder.com
