Stocks slip, yields mixed as U.S. wage growth slows

  • Shares on Wall Street pare steep early losses
  • European stocks head for worst week in 2 months
  • Oil jumps almost 2%, gold rise

NEW YORK/LONDON, May 6 (Reuters) – U.S. Treasury yields were mixed and global stock markets slid further on Friday as U.S. labor data showed decelerating wage growth in April and investors worried the Federal Reserve may tighten policy too much as it fights inflation.

U.S. Labor Department data on Friday showed the unemployment rate fell to its pre-pandemic low of 3.5% last month as job growth moderated and average hourly earnings eased to 5.5% from a year earlier. The data underscored the challenge the Fed faces as it battles sky-high inflation. read more

Trading on Wall Street opened with a sharp decline for stocks, after the open and most major bourses in Europe were down more than 1% after Asian markets outside of Tokyo fell heavily overnight. But the three major U.S. indexes pared losses. The Dow Jones Industrial Average (.DJI) was down 0.19%, the S&P 500 (.SPX) lost 0.19% and the Nasdaq Composite (.IXIC) dropped 0.3%.

Register now for FREE unlimited access to

Treasury yields rose at the long end as the gap between yields on two- and 10-year Treasury notes widened to 41.0 basis points. But fed funds futures priced in a roughly 75% chance of a 75 basis-point interest rate hike at next month’s Fed policy meeting. FEDWATCH

“The market is focused on the Fed being behind the curve and that’s why the market is down,” said Keith Lerner, chief market strategist and co-chief investment officer at Truist Advisory Services. “Yields are telling you that they’re concerned that the Fed is behind the curve.”

The yield on benchmark 10-year Treasury notes was up 1.5 basis points to 3.083%. MSCI’s gauge of stock performance around the globe (.MIWD00000PUS) shed 1.55%, while the pan-European STOXX 600 index (.STOXX) lost 2.15% as regional shares headed toward their worst week in two months.

The Fed hopes to slow inflation by tightening monetary policy. There is a risk that too much tightening could drag the economy into recession, so market volatility has increased.

Russell Price, chief economist at Ameriprise Financial, said the Labor Department’s unemployment report showed the U.S. job market remains solid.

“Over the last few months we have seen the month-over-month pace of average hourly earnings starting to decelerate somewhat,” he said. “That’s a positive indicator that this surge in hourly wages that we experienced may finally be easing.”

The dollar slipped against a basket of currencies after two volatile days as investors focused on how aggressive the Fed will be in hiking rates.

The dollar index hit a 20-year high overnight on safe haven demand, the day after a sharp stock selloff driven by rising U.S. interest rates and as European currencies weakened on worries about growth in the region.

The dollar index fell 0.01%, with the euro up 0.2% to $1.0561. The Japanese yen weakened 0.30% at 130.52 per dollar.

The European Central Bank should raise its deposit rate back into positive territory this year, French central bank chief Francois Villeroy de Galhau said, indicating his support for at least three rate hikes in 2022. read more

The Bank of England raised rates by 25 basis points on Thursday as expected, but two policy makers expressed caution about future rate hikes. read more

Oil prices climbed for a third straight session, shrugging off concerns about global economic growth as impending European Union sanctions on Russian oil raised the prospect of tighter supply.

U.S. crude rose 1.13% to $109.48 per barrel and Brent was at $112.15, up 1.13% on the day.

Bitcoin fell 1.55% to $35,967.39, and spot gold added 0.4% to $1,884.85 an ounce.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) shed 2.69% to hit its lowest level since March 16. Chinese blue chips (.CSI300) lost 2.53%, the Hong Kong benchmark (.HSI) fell 3.89% and China’s yuan tumbled to an 18-month low in both onshore and offshore markets. ,

Germany’s 10-year government bond yield rose to 1.082%, its highest since 2014.

Oil prices climbed for a third straight session, shrugging off concerns about global economic growth as impending European Union sanctions on Russian oil raised the prospect of tighter supply.

Brent futures jumped 2.16% to $113.25 a barrel. U.S. crude climbed 2% to $110.41 a barrel.

Gold gained 0.36% to $1883.63 an ounce.

correlations global stocks and bonds
Register now for FREE unlimited access to

Reporting by Herbert Lash, additional reporting by Alun John in Hong Kong and Sujata Rao in London; Editing by Andrew Heavens and Chizu Nomiyama

Our Standards: The Thomson Reuters Trust Principles.

Leave a Reply

Your email address will not be published.

Back to top button