Global stocks retreated from record highs on Friday as U.S. government debt yields surged following stronger-than-expected U.S. monthly jobs data. The U.S. economy added 272,000 new jobs last month, surpassing economists’ predictions and dispelling concerns of a weakening job market. This led to a 0.2% decline in MSCI’s world share index after reaching a record level the previous day.
Futures markets indicated a cautious start for U.S. stocks, with S&P 500 contracts falling 0.6% as U.S. Treasuries bore the brunt of the inflationary jobs report. The benchmark 10-year U.S. Treasury yield rose by 13 basis points to 4.4%, while the two-year yield increased to 4.846% after six consecutive days of decline.
Following the jobs report, money market pricing suggested that the Federal Reserve might not begin cutting rates from their current level of 5.25-5.5% until November. Earlier expectations of a rate cut in September were dampened by the strong labor market report.
The Bank of Canada recently became the first G7 nation to lower its key policy rate, following similar moves by Sweden and Switzerland. The euro zone also saw a reversal in rate pricing, with traders now predicting 55 basis points of cuts in the region this year.
European stocks, which had seen significant gains this year, experienced losses on Friday. Euro zone bonds were lackluster, with Germany’s 10-year Bund yield rising to 2.617%. The dollar strengthened against a basket of currencies, while the euro declined to $1.083. Brent crude oil futures rose to $80.13 per barrel, while spot gold dropped to $2,317.78 an ounce.