By Angela Moon
NEW YORK Jan 13 The U.S. dollar dropped to its
lowest in four weeks against the yen on Monday and bond yields
fell to a three-week low after last week's soft U.S. jobs data
dampened optimism about the outlook for the world's largest
A measure of world stock markets was also lower, weighed by
a broad decline on Wall Street on growing caution ahead of an
onslaught of corporate results. Negative pre-announcements have
been piling up, leaving a lackluster profit growth outlook.
The greenback fell to its weakest against the yen since Dec.
18, to 102.86 yen. It was last down 1.17 percent at 102.89 yen
"Dollar/yen is having a clear aftershock reaction to the
very weak (nonfarm payroll) number, because the number reset
expectations across all markets - including interest rate
markets, which are very important to dollar/yen," said Boris
Schlossberg, managing director of FX strategy at BK Asset
Management in New York.
The dollar continued its slide against the yen after Dennis
Lockhart, President of the Federal Reserve Bank of Atlanta,
highlighted concern about the still struggling U.S. labor
market. He cautiously endorsed further cuts to the stimulative
program, warning that the labor market has not yet healed and
that there are worrisome signs of disinflation in the
Meanwhile, U.S. Treasuries prices rose, with the yield on
the benchmark 10-year note falling to a three-week low after
registering the largest one-day fall since October on Friday on
news U.S. employers added only 74,000 workers in December, far
short of the 196,000 rise forecast by analysts polled by
Benchmark 10-year notes rose 9/32 in price to
yield 2.8248 percent, down from a high of 2.967 percent on
Thirty-year bonds rose 12/32 in price to yield
3.7775 percent, down from Friday's high of 3.891 percent.
The lower-than-expected jobs gain is not yet seen as likely
to alter the Fed from its course of reducing bond purchases,
which were cut by $10 billion to $75 billion a month and are
seen as likely to be pared further over coming months.
But speculation over when the Fed is likely to begin raising
benchmark interest rates from rock-bottom levels is likely to
keep short- and intermediate-dated debt volatile, with
expectations for a rate hike varying from mid-2015 to 2016.
U.S. stocks ended lower on Monday on concerns that stocks
may have become expensive after the benchmark S&P 500 hit its
highest in nearly seven years.
Wall Street has seen a slow start to the year following a
gangbusters 2013. After the S&P 500's jump of almost 30 percent
last year, its forward price-to-earnings ratio is the highest in
nearly seven years and investors are weighing the risk of paying
such a premium for earnings that may see growth stall.
Almost 10 out of 11 earnings pre-announcements from S&P 500
companies lowered estimates, according to Thomson Reuters data.
"People have moved to the sidelines waiting for earnings to
get a little more clarity," said Michael O'Rourke, chief market
strategist at JonesTrading in Greenwich, Connecticut.
"Fundamentals are going to have to support gains in the
future," he said, pointing to the gradual decline in the
stimulus from the Federal Reserve that has pushed U.S. equities
as an asset class higher.
On Wall Street, the Dow Jones industrial average was
down 179.11 points, or 1.09 percent, at 16,257.94. The Standard
& Poor's 500 Index was down 23.17 points, or 1.26
percent, at 1,819.20. The Nasdaq Composite Index was
down 61.36 points, or 1.47 percent, at 4,113.30.
Investors will keep an eye on fourth-quarter earnings, with
major U.S. banks, including JPMorgan, Citigroup
and Goldman Sachs, announcing results this week. European
earnings will gather pace in the last week of the month.
In Europe, banking shares rallied after regulators agreed to
soften new leverage ratios for banks. The STOXX bank index
rose 1.5 percent, extending its gains this year to
almost 6 percent.
MSCI's world equity index was down 0.5
percent while emerging stocks were up 0.8 percent.
The FTSEurofirst 300 index of top European shares
rose 0.3 percent to 1,324.42, while the euro zone's blue-chip
Euro STOXX 50 index was up 0.3 percent at 3,111.94,
both just a few points below five-year highs hit recently.
In commodity markets, oil fell after news of a deal between
Western nations and Iran to curb the OPEC country's nuclear
program and as production resumed from Libya and a key North Sea
Brent crude for February delivery ended the session
50 cents lower at $106.75 per barrel, after settling 86 cents
higher on Friday. U.S. crude slipped 92 cents to settle
at $91.80, after closing $1.06 higher in the previous session.