NEW YORK, June 3 (Reuters) - Global equity markets fell as U.S. Treasury yields reached two-week highs on Friday after data showed the American economy generated a greater-than-expected number of jobs in May, signaling the Federal Reserve will likely continue raising interest rates in its effort to curb inflation.
The
Labor Department's closely watched employment report showed the U.S. economy
added 390,000 jobs in May, with the unemployment rate holding steady at 3.6%
for a third straight month, beating most analyst estimates.
Traders
were hoping the jobs report would reveal stronger signs of weakness in the U.S.
economy that would help persuade the Fed to soften its stance on inflation and
interest rates to avoid triggering a recession.
"It
was strength across the board with the exception of retail trade, and the
economy on the jobs front continues to power forward," said Josh Wein,
portfolio manager at Hennessy Funds in Chapel Hill, North Carolina. "The
Fed still needs to unfortunately destroy a little bit of demand and they are
going to continue to do that for at least the next few meetings with 50-point
rate hikes."
The
MSCI world equity index (.MIWD00000PUS), which tracks shares in 50
countries, was down 1.14%. The pan-European STOXX 600 index (.STOXX) was down 0.26%.
U.S.
Treasury yields advanced to two-week highs after the strong jobs data. Benchmark
10-year notes were up at 2.946%, while the rate-sensitive two-year year note
gained and was up at 2.6606%.
On
Wall Street, all three major indexes closed lower, pushed down by sell-offs in
the technology, consumer discretionary, communication services, financials and
industrials sectors.
The
Dow Jones Industrial Average (.DJI) fell
1.05% to 32,899.7, the S&P 500 (.SPX) lost 1.63% to 4,108.54 and the
Nasdaq Composite (.IXIC) dropped
2.47% to 12,012.73.
"Some
of the rally (in equities) of late was due to the Fed acknowledging that in the
fall they could reassess and take a pause perhaps. But the market is retracing
some of their earlier losses and saying basically that's all off the
table," Wein said.
The
U.S. dollar edged higher against a basket of currencies after the employment
report. The dollar index rose 0.393%, with the euro was down 0.25% to $1.0718.
Oil
prices settled higher, buoyed by expectations that OPEC's decision to increase
production targets by slightly more than planned will not affect tight global
supply much and by rising demand as China eases COVID-19 pandemic-related
restrictions.
Brent
crude rose 1.8%, to settle at $119.72 a barrel and U.S. West Texas Intermediate
crude advanced 1.7% to $118.87. Both benchmarks were up by more than $3 in
after-hours trading.
Gold
prices fell nearly 1% after bullion's appeal was dented by the rise in the U.S.
dollar and Treasury yields following the strong jobs data.
Spot
gold dropped 0.9% to $1,850.57 an ounce, while U.S. gold futures fell 0.99% to
$1,848.10 an ounce.
Source:Reuter