Equities rise with dollar, strong US payrolls dampen rate cut hopes
· CNA · JoinNEW YORK/ LONDON :MSCI's global equities index rose on Friday while the dollar climbed to its highest level since August after data showed the U.S. economy added far more jobs than expected in September, erasing expectations for another big Federal Reserve rate cut.
The U.S. Bureau of Labor Statistics said 254,000 workers were added to nonfarm payrolls last month, well above the 140,000 economist estimate, while August's number was revised higher and the 4.1 per cent unemployment rate was lower than expected.
U.S. Treasury yields rose to their highest level since mid-August and traders ditched bets that the Fed will cut rates by half a percentage point next month.
"The number was phenomenal. It came in well above expectations. The unemployment rate came down and it shows the economy is strong," Gene Goldman, chief investment officer at Cetera Investment Management.
"All the data this week suggested the economy is strong. This puts a final nail in the coffin for the Fed."
Bringing further relief for U.S. economy was the reopening on Friday of U.S. East Coast and Gulf Coast ports after dockworkers and port operators reached a wage deal to settle the industry's biggest work stoppage in nearly half a century. However, clearing cargo backlog is expected to take time.
On Wall Street at 11:16 a.m. the Dow Jones Industrial Average rose 43.15 points, or 0.11 per cent, to 42,055.81, the S&P 500 rose 16.74 points, or 0.29 per cent, to 5,716.68 and the Nasdaq Composite rose 106.22 points, or 0.59 per cent, to 18,023.55.
But oil prices were still rising as flaring tensions in the Middle East raised the risk of serious disruptions to global crude supply.
Supreme Leader Ayatollah Ali Khamenei said on Friday that Iran and its regional allies will not back down while Israel vowed to respond after Iran fired missiles at it on Tuesday, partly in retaliation for Israel's killing of a key Hezbollah figure who turned the group into a powerful armed and political force with reach across the Middle East.
U.S. crude rose 1.22 per cent to $74.63 a barrel and Brent rose to $78.45 per barrel, up 1.07 per cent on the day.
In currencies, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.57 per cent to 102.49.
The euro was down 0.53 per cent at $1.0972 while against the Japanese yen, the dollar strengthened 1.03 per cent to 148.44.
Sterling weakened 0.1 per cent to $1.3111, surrendering earlier gains made after Bank of England chief economist Huw Pill said high interest rates were not a key reason for weakness in British business investment.
In Treasuries, the yield on benchmark U.S. 10-year notes rose 10.2 basis points to 3.952 per cent, from 3.85 per cent late on Thursday while the 30-year bond yield rose 6 basis points to 4.2395 per cent.
The 2-year note yield, which typically moves in step with interest rate expectations, rose 17.7 basis points to 3.8906 per cent, from 3.714 per cent late on Thursday.
A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 5.9 basis points.
In precious metals, spot gold rose 0.4 per cent to $2,666.79 an ounce. U.S. gold futures rose 0.37 per cent to $2,667.00 an ounce.
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