FT: Dollar and bond yields slip on mild US jobs growth
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The dollar and government bond yields are softer as traders bet that a mild US jobs report makes it less likely the Federal Reserve will raise borrowing costs this month.
The Labor Department said a net 151,000 jobs were created in the world’s biggest economy in August, confounding expectations of a 180,000 gain. The nation’s unemployment rate remained at 4.9 per cent against forecasts of a dip to 4.8 per cent, while average earnings rose by 0.1 per cent, when an increase of 0.2 per cent was expected.
Some members of the Fed in recent weeks have said they are minded to deliver another interest rate rise this year, providing data suggested the US economy was sufficiently robust to absorb such a policy tightening.
The market reaction on Friday suggests many investors think the new jobs numbers are unlikely to encourage the central bank to pull the rate hike trigger in coming months.
The chance of a 25 basis point rise in the Federal Funds rate at the September meeting is 22 per cent, down from 34 per cent just before the jobs data were released, according to markets pricing tracked by Bloomberg.
Yields on US 2-year government bonds, which are particularly sensitive to monetary policy, are down 4 basis points to 0.75 per cent.
Longer-term bond yields are also softer, with the 10-year Treasury off 1bp to 1.56 per cent and equivalent maturity German Bunds retreating 1bp to minus 0.07 per cent.
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The sliding income on offer from US assets is hurting the dollar. The Japanese yen is 0.2 per cent stronger at ÂĄ103.01, while the euro adds 0.3 per cent to $1.1228 and the pound gains 0.4 per cent to $1.3221.
Gold tends to benefit when the dollar and interest rates fall, and so the yellow metal is up $14 to $1,327 an ounce.
Equities like the idea of US borrowing costs likely staying at low levels for longer, especially as the jobs growth of 233,000 on average for the last three months suggests an economy that is trundling along reasonably well.
US futures have bounced off session lows and point to the S&P 500 adding 2 points to 2,173, leaving the Wall Street benchmark just 17 points off its record closing high.
The pan-European Stoxx 600 is up 0.7 per cent, with London’s FTSE 100 adding 1.2 per cent as shares in resources companies rally as dollar-denominated energy prices welcome the weaker buck. Brent crude is up 2.3 per cent at $46.48 a barrel, halting a four-day, 9 per cent slide for the oil benchmark which came amid oversupply fears.
Earlier in Asia, caution reigned ahead of the US jobs report. Japan’s Nikkei 225 was flat and China’s Shanghai Composite rose just 0.1 per cent. Hong Kong’s Hang Seng managed a 0.45 per cent gain, while Australia’s S&P/ASX 200 was one of the region’s worst performers — falling 0.8 per cent, with the heavyweight telecommunications and financials sectors among the hardest hit.
