U.S. payrolls report lifts dollar, equities, bond yields

By Chuck Mikolajczak

NEW YORK (Reuters) – The U.S. dollar and bond yields rose while stocks on Wall St edged higher on Friday, following a stronger-than-expected U.S. jobs report, which also showed wage growth picked up in the world’s largest economy.

The U.S. Labor Department said nonfarm payrolls rose by 209,000 jobs last month. June’s employment gain was revised up to 231,000 from a previously reported 222,000. The unemployment rate fell to 4.3 percent while average hourly earnings rose 0.3 percent, the largest increase in five months.

The report may pave the way for the U.S. Federal Reserve to start shrinking its $4.5 trillion balance sheet.

U.S. stocks retreated from early highs to keep a gauge of world stocks near the unchanged mark, although the index remained on track for its fourth straight week of gains. The report also bolstered the dollar from 15-month lows against a basket of major currencies.

“It was strong across the board,” said Justin Lederer, interest rate strategist at Cantor Fitzgerald in New York.

“It puts (the Fed) still on track to start the program to wind down the book in September and it’s a long ways off in December for the next rate hike.”

The Dow Jones Industrial Average rose 37.78 points, or 0.17 percent, to 22,063.88, the S&P 500 gained 3.01 points, or 0.12 percent, to 2,475.17 and the Nasdaq Composite added 5.16 points, or 0.08 percent, to 6,345.50.

Financials, up 0.9 percent, were the best performing S&P sector, but gains on the broader S&P 500 were curbed by a decline in healthcare names, and an 11.5 percent drop in Viacom.

The pan-European FTSEurofirst 300 index rose 1 percent and MSCI’s gauge of stocks across the globe shed 0.02 percent.

The FTSEurofirst notched its best day since July 12.

The greenback was on pace for its biggest daily percentage gain since Dec. 15 and its first weekly gain in four, buoyed by the jobs report and comments from National Economic Council director Gary Cohn that the U.S. administration is working on a tax plan that would bring corporate profits back to the United States.

The dollar had been weakening on political uncertainty in Washington, including news on Thursday that a grand jury has issued subpoenas relating to an investigation of suspected Russian meddling in the 2016 U.S. election.

The dollar index rose 0.8 percent, with the euro down nearly 1 percent to $1.1754.

In bond markets, traders were betting the payrolls figures would cause the Fed to start to trim its balance sheet next month while a rate hike later this year could not be ruled out.

Benchmark 10-year U.S. Treasury notes were last down 11/32 in price to yield 2.2655 percent, from 2.228 percent late on Thursday.

Oil prices recouped earlier losses on Friday as the jobs report bolstered hopes for rising demand but remained on track for a weekly decline, weighed down by rising OPEC exports and strong output from the United States.

U.S. crude rose 0.69 percent to $49.37 per barrel and Brent was last at $52.21, up 0.38 percent.

Gold dipped as the payrolls number boosted the dollar, with the metal on track for its first weekly fall in four.

Spot gold dropped 0.8 percent to $1,257.76 an ounce. U.S. gold futures fell 0.86 percent to $1,263.40 an ounce.

(Additional reporting by Karen Brettell; Editing by Bernadette Baum and James Dalgleish)

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