Global stock index sinks with dollar, bond yields after weak US jobs data

MSCI's global equities index sold off sharply on Friday and the dollar took a dive after weaker-than-expected U.S. jobs data ramped up expectations for Federal Reserve rate cuts in September while investors also considered U.S. President Donald Trump's latest tariff announcements.

U.S. Treasuries were in demand after the Labor Department reported that the U.S. economy added 73,000 nonfarm payrolls last month, below the 110,000 expected by economists surveyed by Reuters. July unemployment rose to 4.2%. June's job growth was revised sharply lower to 14,000 from 147,000.

After the report, Trump said on Friday afternoon that he ordered his team to fire the commissioner of the U.S. Bureau of Labor Statistics, Erika L. McEntarfer, nominated by prior President Joe Biden for the role.

After the data, traders were betting on a 69% probability for a September rate cut compared with 37.7% on Thursday, according to CME Group's FedWatch tool.

"The market is reacting to the possibility of the economy flipping into recession. The weak jobs data is piling on to weak earnings reports and weak guidance from some corporations," said Luke Tilley, Chief Economist, Wilmington Trust.

MSCI's gauge of stocks across the globe EURONEXT:IACWI fell 11.89 points, or 1.27%, to 917.80, putting it on track for its biggest daily drop since late April. The softer jobs data added to losses for the global index, which was already in the red after a host of tariff announcements from Trump the day before.

In time for an August 1 deadline, Trump ordered tariffs ranging from 10% to 41% on U.S. imports from several major trading partners. He increased duties on Canadian goods to 35% from 25% for all products not covered by the U.S.-Mexico-Canada trade agreement. He set a 25% rate for India's U.S.-bound exports, 20% for Taiwan's, 19% for Thailand's and 15% for South Korea's. However, Mexico got a 90-day reprieve from higher tariffs to allow for deal talks.

"We've had some mixed earnings from the big companies. We've had a big run higher in the market. We've had broad tariffs implemented and a labor market report that was softer than expected," Scott Wren, senior global market strategist, Wells Fargo Investment Institute. "All of those things have played into today's sell-off."

On Wall Street at 2:33 p.m. ET the Dow Jones Industrial Average DJI fell 529.87 points, or 1.20%, to 43,601.24, the S&P 500 SPX fell 99.53 points, or 1.57%, to 6,240.00 and the Nasdaq Composite IXIC fell 456.71 points, or 2.16%, to 20,666.45.

Earlier the pan-European STOXX 600 SXXP index ended down 1.89%, its biggest daily drop since April 9.

In currencies, the greenback reversed course to fall sharply after the data due to increased expectations for rate cuts. Earlier it had found support in fading hopes for U.S. rate cuts.

The dollar index DXY, which measures the greenback against a basket of currencies including the yen and the euro, fell 1.02% to 99.01.

The euro EURUSD up 1.1% at $1.1541 while sterling GBPUSD strengthened 0.23% to $1.3236 and the Canadian dollar USDCAD strengthened 0.43% versus the greenback to C$1.38 per dollar.

Against the Japanese yen USDJPY, the dollar weakened 1.98% to 147.75. The Bank of Japan held interest rates steady on Thursday and revised up its near-term inflation expectations, but Governor Kazuo Ueda sounded a little dovish in the press conference.

U.S. Treasury yields plunged after the jobs data and the increase in bets that the Fed will resume interest rate cuts in September.

The yield on benchmark U.S. 10-year notes US10Y fell 13.2 basis points to 4.228%, from 4.36% late on Thursday while the 30-year bond (US30YT=RR) yield fell 7.4 basis points to 4.8111%.

The 2-year note (US2YT=RR) yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 23.7 basis points to 3.715%, from 3.951% late on Thursday.

In energy markets , oil prices sank about 2.8% after the jobs data and on jitters about a possible production increase by OPEC and its allies. Oil had settled around 1% lower on Thursday.

U.S. crude CL1! settled down 2.79%, or $1.93 at $67.33 a barrel and Brent BRN1! settled at $69.67 per barrel, down 2.83%, or $2.03 on the day.

Elsewhere in commodities, gold prices rallied to a one-week high, after the weak jobs report boosted policy easing expectations and the latest tariff announcements spurred safe-haven demand.

Spot gold GOLD rose 1.78% to $3,348.72 an ounce.