London: The dollar and US government bond yields rose on Friday and gold tumbled, as stronger than expected jobs data boosted the case for an imminent scaling-back of Federal Reserve stimulus.
The debate over when the Fed will start reducing the flow of cheap dollars has dominated trading worldwide for months. The main US employment indicator — non-farm payrolls — bolstered the view that the job market in the world’s biggest economy is on the mend.
A total of 203,000 new jobs were added last month, the Labour Department said, beating expectations of 180,000, while the unemployment rate dropped three-tenths of a percentage point to a five-year low of 7 per cent.
The dollar took it as supporting the case for a Fed move, and jumped to session highs against both the euro and the yen. US Treasury yields, which act as a benchmark for borrowing costs around the world, briefly climbed above 2.9 per cent.
“It’s a very solid number, not only on the non-farm payrolls side, but with the unemployment rate falling by 0.3 percentage point and the labour force participation rate up,” said Eric Stein, co-director Global Income Group at Eaton Vance Investment Managers in Boston.
“The US labour market is still far from healed, but it certainly is moving in the right direction. This number puts a December taper on the table, but it isn’t a certainty.”
European shares quickly regained their morning mojo having wobbled before the data. Wall Street stock futures jumped, with gains of around 1 per cent expected for both the S&P 500 and Dow Jones Industrial Average.
For gold, which benefits from US stimulus due to its appeal as an inflation hedge, it was a different story: Spot gold fell almost 1 per cent to a session low of $1,211.80 an ounce while the gold price in euros hit its lowest level in three-and-a-half years.