The dollar surged to a 13-year high versus the yen and Treasuries tumbled after a jump in payrolls bolstered the case for raising interest rates. U.S. stocks were slipped amid speculation the economy can withstand higher rates, while Europe’s bond selloff resumed as Greece deferred a debt repayment.
The Bloomberg Dollar Spot Index added 0.8 percent at 4 p.m. in New York, with the greenback rising to 125.49 yen. The yield on 10-year Treasuries increased 10 basis points to 2.40 percent. German bunds capped their worst week since 1998. The Standard & Poor’s 500 Index slipped 0.1 percent after swinging between gains and losses. The Stoxx Europe 600 Index dropped 0.9 percent to cap a weekly decline.
Payrolls climbed in May by the most in five months and worker pay accelerated, signs of labor-market strength and incipient inflation that may prompt the Federal Reserve to raise borrowing costs this year. Global bond-market gains for 2015 have been wiped out this week amid signs of growth and inflation in Europe, while Greece’s debt crisis remained unresolved.
“This pulls forward the expectation for rate hikes,” Anwiti Bahuguna, senior portfolio manager at Columbia Threadneedle Investments, said by phone. “The big move today is in the bond market and the dollar, not in stocks, because good data could also be good news for stocks, as it’s good for the economy and earnings.”
The S&P 500 capped a second weekly decline as concern that mixed data on the strength of the economy wouldn’t prevent the Fed from tightening. The payrolls report bolsters the case that growth has resumed after the harsh winter led to a first-quarter slowdown.
A dwindling in the ranks of the unemployed would be consistent with forecasts the Federal Reserve will raise its benchmark interest rate later this year. Futures show a 53 percent chance the Fed will increase interest rates by its October meeting, up from 44 percent Thursday, according to CME Group data.
“Good news is good news,” said Douglas Coté, the New York-based chief market strategist at Voya Investment Management in a phone interview. Voya oversees $215 billion. “Investors should be looking past some short-term volatility in the financial markets and get to their normal allocation in equities because ultimately this is good for the market.”
Germany’s 10-year bund yield climbed 36 basis points this week and is up from a record-low of 0.049 percent set on April 17. The force of the selloff put the securities at the center of a global fixed-income slump amid signs of a revival in euro-area inflation. Italy’s 10-year yield rose 10 basis points to 2.24 percent Friday, up from 1.85 percent on May 29.
The Stoxx 600 dropped for a fourth day to a one-month low after capping a 2.7 percent slide in the week. Greece’s ASE Index lost 5 percent, the most among western-European markets, and the yield on the government’s 10-year bond jumped 31 basis points to 11.22 percent.
Greece told the IMF it would put off a repayment of about $339 million due Friday, requesting instead to bundle all four payments scheduled in June into one lump sum. Prime Minister Alexis Tsipras called on creditors to withdraw their “unrealistic” plan to provide the nation more money,
“With Greece missing today’s payment, we’re going to get at least one more month of uncertainty,” Michael Kapler, who manages equities at Mittelbrandenburgische Sparkasse, said by phone from Potsdam, Germany. “That means June will be another volatile month for markets. Sentiment is being hit by a stalemate in Greece.”
The MSCI Emerging Markets Index lost 0.8 percent, declining for a 10th day in the longest stretch of losses since November 2013.
Crude rose after explorers pulled U.S. oil rigs for the 26th straight week, bolstering speculation that production will slip. Oil in New York capped its first weekly drop since March after OPEC agreed to maintain output.
For more, read this QuickTake: The Almighty Dollar
West Texas Intermediate oil for July delivery added 2 percent to settle at $59.13 a barrel in New York. Futures dropped 1.9 percent this week to snap a record 11-week rally. Brent futures rose 2.1 percent to end at $63.31 a barrel in London. The contract is down 6 percent this week.