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Global stocks index flat, Dollar falls on mixed U.S. jobs data

Published 07/06/2023, 10:12 PM
Updated 07/07/2023, 05:16 PM
© Reuters. FILE PHOTO: A man walks past an electric monitor displaying Japan's Nikkei share average and recent movements, outside a bank in Tokyo, Japan, June 5, 2023. REUTERS/Issei Kato
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By Sinéad Carew

NEW YORK (Reuters) - MSCI's global equity index ended Friday's session virtually unchanged while the dollar was lower as government data showed that U.S. jobs growth slowed more than expected in June, easing worries about the outlook for Federal Reserve rate hikes.

But while investors appeared to hold out hope for a less hawkish Fed, they were also looking cautiously to the week ahead, with key U.S. inflation readings due along with the start of the second-quarter earnings season.

Official U.S. nonfarm payrolls on Friday showed employers added 209,000 new hires in June, below forecasts, while May numbers were revised down by 33,000 to 306,000. Still, the unemployment rate fell to 3.6% in June from 3.7% in May and average hourly earnings rose 0.4%, the same as May.

On Thursday, private payroll provider ADP's strong U.S. labor market data had sparked an equities sell-off and boosted Treasury yields.

While Friday's government data was initially met with a more muted market reaction, stocks gained some ground during the session before losing ground again in afternoon trading.

"Investors are more cautious going into a very important week with the beginning of earnings season and a very important inflation reading mid week," said Quincy Krosby, chief global strategist, LPL Financial (NASDAQ:LPLA) in Charlotte, North Carolina.

Earlier in the session traders appeared relieved that payrolls came in "much lower than feared, based on the ADP report," said Sam Stovall, chief investment strategist at CFRA Research, adding that investors may have concluded that they "over-reacted" on Thursday.

"Investors still have a bullish mindset and are using near-term weakness as a buying opportunity," Stovall added.

However, the Dow Jones Industrial Average fell 187.38 points, or 0.55%, to 33,734.88, the S&P 500 lost 12.64 points, or 0.29%, to end at 4,398.95 and the Nasdaq Composite dropped 18.33 points, or 0.13%, to close at 13,660.72.

MSCI's gauge of stocks across the globe shed 0.05% after rising as much as 0.6% earlier on Friday. Emerging market stocks lost 0.41%.

While traders still were still betting on a more than 90% chance that the Fed would raise rates by a quarter of a percentage point in late July, expectations for another hike in September fell slightly, according to CME Group's (NASDAQ:CME) FedWatch tool.

The dollar slumped after the labor market data as some traders were betting that the Fed could cut rates sooner than previously expected. Also the yen jumped sharply against the dollar.

The dollar index fell 0.795%, with the euro up 0.73% to $1.0965.

The Japanese yen strengthened 1.40% versus the greenback at 142.10 per dollar, while Sterling was last trading at $1.2835, up 0.75% on the day.

Some U.S. Treasury yields dialed down on Friday, although longer-dated yields were higher, after the jobs data calmed worries the Fed could become more aggressive with rate hikes.

Benchmark 10-year notes were up 2.3 basis points to 4.064%, from 4.041% late on Thursday. The 30-year bond was last up 4.6 basis points to yield 4.0491%, from 4.003%. But the 2-year note was last was down 6 basis points to yield 4.9459%, from 5.006%.

In commodities, oil prices rose to 6-week highs as supply concerns outweighed fears about that more rate hikes could slow economic growth and reduce demand for oil.

© Reuters. FILE PHOTO-Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in Manhattan in New York City, New York, U.S., October 26, 2020. REUTERS/Mike Segar/file photo

U.S. crude settled up 2.87% to $73.86 per barrel and Brent finished at $78.47, up 2.55% on the day.

Spot gold added 0.7% to $1,924.13 an ounce. U.S. gold futures gained 0.89% to $1,925.60 an ounce.

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