Stock markets plummet worldwide in tandem with a falling dollar and bond yields, following disappointing employment figures in the United States.
In a surprising turn of events, the U.S. jobs market has shown a significant slowdown, causing a ripple effect across global markets. The U.S. added only 73,000 nonfarm payrolls last month, significantly lower than the expected 110,000, and June's job growth was revised sharply lower to 14,000 from 147,000.
This weaker-than-expected data has led to a sharp decline in the U.S. equity market. The S&P 500 fell 1.7%, and the Nasdaq 2.3%, reflecting investor concerns about the state of the labor market.
The disappointing jobs report has also pushed U.S. Treasury yields lower due to anticipated Federal Reserve easing. The yield on the benchmark 10-year notes fell 11.9 basis points to 4.241%. Similarly, the 2-year note yield dropped by 21.6 basis points, and the 30-year bond yield fell 6.6 basis points to 4.8191%.
The weaker U.S. jobs data has increased expectations for Federal Reserve rate cuts. After the data, traders are betting on a 69% probability for a September rate cut by the Federal Reserve, up from 37.7% on Thursday.
However, the uncertain economic environment created by President Trump's continuation of tariff announcements could add further uncertainty and risk to the global economy. Tariffs can slow global trade and growth, potentially exacerbating investor concerns and further pressuring global equities.
In this scenario, the weaker U.S. jobs data and expectations of Fed cuts may counteract dollar strength by reducing interest rate differentials that usually support a stronger dollar. The greenback reversed course to fall sharply after the data, with the dollar index falling 1%. Against the Japanese yen, the dollar weakened 1.76% to 148.08, and against the euro, it was up 1.11% at $1.1542.
Meanwhile, the Bank of Japan held interest rates steady and revised up its near-term inflation expectations. Governor Kazuo Ueda sounded a little dovish in the press conference. The Canadian dollar strengthened 0.44% versus the greenback, and the sterling strengthened 0.32% to $1.3247.
In the commodity market, oil prices fell more than 2% with U.S. crude falling 2.66% to $67.42 a barrel, and Brent falling 2.76% to $69.72 per barrel. Gold prices rallied to a one-week high with spot gold rising 1.83% to $3,350.10 an ounce.
MSCI's global equities index, the pan-European STOXX 600 index, and MSCI's gauge of stocks across the globe all fell due to the weaker than expected U.S. jobs data and expectations for Federal Reserve rate cuts. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all fell on Friday.
Trump's tariff announcements on U.S. imports from several major trading partners could potentially add to the global market's woes. The uncertainty created by these tariffs could further pressure global equities and add risk to the already volatile economic environment.
[1] Source: Reuters, CNBC, Bloomberg
Trading activity in the stock-market has been affected due to the weaker-than-expected U.S. jobs data, causing a decline in the S&P 500 and Nasdaq. The anticipated Federal Reserve rate cuts have also increased investing interest based on the 69% probability for a September rate cut.
The uncertainty created by President Trump's tariff announcements may further pressure global equities, adding risk to the already volatile economic environment, potentially impacting investing decisions in the finance sector.
