US Treasuries erased losses and rallied as a weaker-than-expected jobs report from ADP Research Institute signaled narrowing room for the Federal Reserve to accelerate monetary tightening.
(Bloomberg) — US Treasuries erased losses and rallied as a weaker-than-expected jobs report from ADP Research Institute signaled narrowing room for the Federal Reserve to accelerate monetary tightening.
The two-year yield dropped 8 basis points as data showed US employers added only 145,000 jobs in March, compared with expectations for 210,000 positions. US index futures fluctuated after the release. Earlier, global equity markets drifted lower as hawkish messages from the New Zealand and Australian central banks signaled a prolonged fight against inflation and revived concerns about an economic slowdown.
Nvidia Corp. slid 1.7% in US premarket trading as traders weighed Japan’s decision to join a US alliance to restrict chip-making exports to China. Sodexo SA, a provider of catering services, jumped 11% in Paris after announcing plans to spin off its benefits and rewards business.
The jobs report sent signals contrary to those coming from the Asia-Pacific. The Reserve Bank of New Zealand surprised markets with a half-point interest rate hike, twice as much as forecast. Governor Adrian Orr said inflation is too high and that expectations for price increases may also remain elevated despite a weaker economy. Meanwhile, Reserve Bank of Australia Governor Philip Lowe pushed back against bets its tightening cycle is ending, saying policymakers still expect a need for higher rates.
“The battle against inflation looks far from won,” Ivailo Vesselinov, chief strategist at Emso Asset Management Ltd. said before the ADP release. “Notwithstanding the latest signs of softening economic activity, should disinflation hit a wall later this year, major central banks would struggle to validate the current market pricing for rate cuts.”
Markets in China, Hong Kong and Taiwan were shut for a holiday. The MSCI Asia Pacific Index dropped 0.3%, with Toyota Motor Corp. and Daiichi Sankyo Co. contributing the most to its losses.
Swap contracts downgraded the probability of a quarter-point rate hike at the Fed’s May meeting to around 44%, compared with a 50% chance they saw before the ADP report and a 70% prospect they bet on earlier this week.
Key events this week:
- Eurozone S&P Global Eurozone Services PMI, Wednesday
- US ADP employment change, Wednesday
- US trade, Wednesday
- US initial jobless claims, Thursday
- St. Louis Fed President James Bullard speaks, Thursday
- US unemployment, nonfarm payrolls, Friday
- Good Friday. US stock markets closed, bond markets close for part of the day
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 8:24 a.m. New York time
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 fell 0.2%
- The MSCI World index fell 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0952
- The British pound fell 0.1% to $1.2485
- The Japanese yen rose 0.5% to 131.05 per dollar
Cryptocurrencies
- Bitcoin rose 1% to $28,533.59
- Ether rose 1.7% to $1,909.65
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.30%
- Germany’s 10-year yield declined three basis points to 2.22%
- Britain’s 10-year yield was little changed at 3.43%
Commodities
- West Texas Intermediate crude was little changed
- Gold futures rose 0.3% to $2,044 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Alice Atkins and Tassia Sipahutar.
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