A strong U.S. jobs report that tempered expectations of an aggressive interest rate cut by the Federal Reserve later this month and weak economic data in Germany helped push global stock indexes lower on Friday after hitting record highs earlier this week.
Yields on benchmark U.S. 10-year Treasury notes rose back above 2.0 per cent after hitting their lowest since November 2016 on Wednesday.
Nonfarm payrolls increased by 224,000 last month as government employment rose by the most in 10 months, the U.S. Labor Department reported.
The better-than-expected showing reduced the likelihood the Fed will cut interest rates at its next meeting later this month. Expectations of an equity-friendly rate cut helped push the S&P 500 to record highs earlier this week.
“Obviously, this was a key report for the Fed as well in determining their path in the near term, and with markets fully pricing in a July rate cut and several thereafter, the stronger-than-expected report is likely to throw cold water on those fairly dovish expectations,” said Candice Bangsund, asset allocation manager at Fiera Capital.
MSCI’s gauge of stocks across the globe shed 0.56 per cent.
Canada’s main stock index fell on Friday, as falling gold prices dragged down materials stocks and a strong rebound in U.S. job growth in June drove investors to pare bets of an aggressive interest rate cut by the Federal Reserve.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 46.86 points, or 0.28 per cent, at 16,541.99.
Materials stocks, which include precious and base metals miners, slumped 1.1 per cent, the most among the major 11 sectors.
Gold slid as much as 2 per cent on Friday and was set for its first weekly fall in seven weeks.
Spot gold dropped 1.2 per cent to $1,398.71 per ounce in late trading, having hit a low of $1,386.52 earlier. The metal is set for a weekly decline of about 1 per cent, which could be its biggest since mid-April.
U.S. gold futures settled 1.5 per cent down at $1,400.10.
Meanwhile, the Canadian economy shed a net 2,200 jobs in June after two months of gains, but wages jumped by the most in more than a year - a sign of strength analysts said ruled out the chances of the Bank of Canada cutting interest rates next week. The Canadian dollar weakened on the news.
The financials sector, which tends to benefit from a rising rate environment, rose less than 0.1 per cent.
On Wall Street, the Dow Jones Industrial Average fell 42.59 points, or 0.16 per cent, to 26,923.41, the S&P 500 lost 5.38 points, or 0.18 per cent, to 2,990.44 and the Nasdaq Composite dropped 8.44 points, or 0.1 per cent, to 8,161.79.
Market volume in the U.S. was light due to the holiday-shortened week.
The losses in the U.S. market followed broad dips in European equities after German data showed industrial orders had fallen far more than expected in May, and a warning from the economy ministry that this sector of Europe’s largest economy was likely to remain weak in the coming months.
“Devastating new orders data just undermined any hopes for an industrial rebound. We are starting to lose our optimism,” said Carsten Brzeski, chief economist at ING Germany.
“Combined with the weakest June performance of the labor market since 2002 and disappointing retail sales, today’s new orders wrap up a week to forget for the German economy. The fear factor is back.”
The pan-European STOXX 600 index lost 0.72 per cent.
Benchmark 10-year notes last traded 24/32 lower in price to yield 2.0373 per cent, from 1.955 per cent late on Wednesday.
The dollar index rose 0.57 per cent, with the euro down 0.58 per cent to $1.1219.
Oil prices climbed on Friday, supported by tensions over Iran and a decision by OPEC and its allies to extend an output supply cut deal until next year, but mixed economic data limited the rally.
Brent was up $1.08, or 1.7 per cent, to $64.38 a barrel by 2:02 p.m. EDT (1802 GMT). U.S. West Texas Intermediate (WTI) gained 15 cents to $57.49 a barrel. The U.S. market was closed on Thursday for a national holiday, and WTI trade volumes remained light on Friday.
Both benchmarks were set to record weekly losses as concerns about a slowing global economy outweighed risks to supply.
“We’ve got mixed data – weak manufacturing data from around the globe, but then we have a strong job numbers in the U.S.,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
Reuters