GLOBAL MARKETS-Bond yields and dollar fall after U.S. jobs data

Fri Sep 6, 2013 5:36pm EDT

* Fed still seen reducing bond purchases
    * U.S. stocks end flat as Syria concerns remain
    * Oil prices up on Middle-East tensions


    By Caroline Valetkevitch
    NEW YORK, Sept 6 (Reuters) - Bond yields and the U.S. dollar
fell on Friday after a report showed U.S. jobs growth was less
than expected in August, adding to uncertainty over when the
Federal Reserve will begin to trim its massive bond-buying
program.
     Wall Street stocks ended little changed, giving up much of
the day's earlier gains on lingering concerns about a U.S.
military strike against Syria, though all three major U.S. stock
indexes posted gains for the week.
     At the same time, Syria worries drove up U.S. crude oil
prices more than $2 a barrel to their highest level in more than
two years.
    Gold prices, which have benefited from ultra-cheap central
bank liquidity, also climbed after the U.S. jobs data.
     U.S. employers hired fewer workers than expected in August
and the jobless rate hit a 4-1/2-year low as Americans gave up
the search for work, complicating the Federal Reserve's decision
on whether to scale back its massive monetary stimulus this
month.  
    Policymakers are widely expected to make an announcement on
the bond program when they meet Sept. 17-18, and Friday's data
caused some investors to wonder whether the Fed will trim its
bond purchases by as much as earlier expected.
    The Federal Reserve has said it would begin to reduce its
$85 billion a month worth of bond purchases depending on
improvement in the U.S. labor market. 
    "Perhaps the economy is not as strong as it seemed a few
months ago," said Daniel Heckman, senior fixed income strategist
at U.S. Bank Wealth Management in Kansas City, Missouri. "That
adds to the indecision about whether the Fed will taper in
September or decide to do it in December." 
     A Reuters poll, however, showed a majority of U.S. primary
dealers expect the Fed to announce this month that it will cut
the size of its bond purchases. 
    Benchmark 10-year Treasury notes rose 16/32 in
price, after surging more than a point moments after the payroll
data and their yields fell to as low as 2.864 percent before
retracing back to 2.936 percent. 
    The 10-year yield had touched 3.007 percent overnight, a
level not seen since July 2011.
    Benchmark German Bund yields fell sharply on Friday after
the weak U.S. jobs report. German ten-year yields posted their
biggest daily fall since February, but the move only reversed
Thursday's rise driven by an improving economic outlook and by
the lack of European Central Bank action against rising market
rates. 
    Bund yields fell 9 basis points to 1.945
percent, having risen to a 1-1/2 high of 2.059 percent at the
start of the session. They were still roughly 10 basis points
higher on the week. 
    The U.S. dollar fell from a seven-week high against the
euro.
    The euro was last up 0.5 percent at $1.3180 and the
dollar was down 1 percent against the yen at 99.11 yen.
The dollar index was down 0.6 percent, not far from a
recent seven-week peak of 82.671.
    On Wall Street, the Dow Jones industrial average was
down 14.98 points, or 0.10 percent, at 14,922.50. The Standard &
Poor's 500 Index was up 0.09 points, or 0.01 percent, at
1,655.17. The Nasdaq Composite Index was up 1.23 points,
or 0.03 percent, at 3,660.01.
    For the week, the Dow rose 0.8 percent, the S&P 500 gained
1.4 percent and the Nasdaq increased 2 percent. 
    MSCI's world share index, which tracks 45
countries, was up 0.4 percent, while the FTSEurofirst 300
 ended up 0.5 percent.
    European and U.S. stocks briefly retreated early in the U.S.
session after Russian President Vladimir Putin pledged to assist
Syria. Yet Putin made clear that Russia did not want to be
sucked into a war over Syria. 
    
    OIL GAINS
    U.S. crude oil futures rose on concerns a possible strike
against Syria would cause oil prices to spike. U.S. President
Barack Obama resisted pressure on Friday to abandon plans for
air strikes against Syria and enlisted the support of 10 fellow
leaders for a "strong" response to a chemical weapons attack.
 
    The U.S. Congress will vote next week on President Barack
Obama's proposal to launch a missile strike against Syria.
 
    The United States tightened security at diplomatic missions
in Lebanon and Turkey on Friday because of potential threats,
ordering personnel out of Lebanon and offering to evacuate those
in Adana in southeastern Turkey. 
     "The escalation of the rhetoric and tension has certainly
gotten the crude oil market's attention," said Andy Lebow, vice
president with Jefferies Bache in New York.
    U.S. crude oil for October delivery settled up 2.0
percent, or $2.16 per barrel, at $110.53. The last time crude
oil futures settled above that level was on May 3, 2011, at
$111.05.
    Brent oil, which has already priced in geopolitical concern
over Syria, settled up 86 cents per barrel at $116.12.
    Despite Friday's rally, gold ended the week 0.5 percent
lower for a second consecutive weekly loss as its safe-haven
appeal dropped on a lack of progress about possible U.S.
military strikes against Syria.
    Spot gold was up 1.5 percent to $1,387.46 an ounce.
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