A positive surprise in US nonfarm payrolls and strong wage growth led to a rise in global bond yields and the US dollar. The S&P initially hit a record high before dropping and ending the session unchanged. Equity markets in Europe and Asia were generally softer. Global credit markets remained stable with tight spreads.
Nonfarm payrolls increased by 272k last month, exceeding all forecasts. Average hourly earnings also rose more than expected. However, the unemployment rate increased to 4%, the highest in over two years. Despite this, the labor market remains strong, which may keep inflationary pressure elevated.
The market reduced the implied Fed rate cuts after the data release, with less easing priced in by the end of the year. In Canada, the unemployment rate rose slightly but wages increased, prompting caution about future rate cuts by the Bank of Canada.
Global bond yields rose, led by US treasury yields. The US dollar also strengthened, with major currencies like the euro and yen falling against it. The New Zealand dollar closed lower against the US dollar but remained stable against the Australian dollar.
New Zealand fixed interest markets ended the week unchanged, with government bond yields slightly lower. There is no significant data on the calendar for the day ahead, making it a quiet start to the week.