U.S. Stocks Rise With Dollar on Payroll Report; Oil Falls

New York (Oct 3)  U.S. stocks rose with the dollar while Treasuries fell as data on American payrolls and services industries boosted confidence in the economy. European equities rebounded from the biggest drop in 15 months, while gold erased its gain for the year.

The Standard & Poor’s 500 Index rose 1.1 percent at 4 p.m. in New York, paring a weekly decline to 0.8 percent. The Stoxx Europe 600 Index gained 1 percent after a 2.4 percent rout yesterday. The Bloomberg Dollar Spot Index climbed to a four-year high. Yields on 10-year Treasuries advanced one basis point to 2.44 percent. Gold futures fell below $1,200 an ounce to the lowest level since Dec. 31. Brent crude moved closer to a bear market after dropping 4.9 percent this week.

The U.S. jobless rate declined to a six-year low of 5.9 percent in September and employers in the U.S. added more workers than projected. Service industries capped the strongest quarter of expansion in more than 10 years. The Federal Reserve is on track to end its bond buying this month and is assessing data to determine if the economy is strong enough to withstand higher interest rates. European shares rebounded after slumping yesterday on concern the central bank’s asset-buying plan won’t be enough to revive growth and avoid deflation.
“This allays the fears about growth and offsets what we’re seeing in Europe,” Doug Cote, chief market strategist at Voya Investment Management LLC, said by phone. His firm oversees about $215 billion. “There’s a consistent downward trend in unemployment. It bodes well for not only future GDP growth, but future corporate profits as well.”

Data Watch

U.S. employers added 248,000 in payrolls following a 180,000 August increase that was bigger than previously estimated, the Labor Department reported in Washington. The median forecast of economists in a Bloomberg survey called for a 215,000 advance. The unemployment rate fell to the lowest level since July 2008 from 6.1 percent.

While the Institute for Supply Management’s non-manufacturing index fell to 58.6 from the prior month’s 59.6, the third-quarter average was the highest since the first three months of 2004, a report from the Tempe, Arizona-based group showed today. Readings above 50 signal expansion.

Stocks tumbled this week amid signs of economic weakness in Europe and geopolitical turmoil. The S&P 500 erased a 1 percent drop yesterday to halt a three-day losing streak. The gauge has not fallen four straight days this year. It has lost 2.2 percent from an all-time high reached Sept. 18.
The Bloomberg Dollar Spot Index jumped the most since June as the jobs report bolstered the case for the Fed to raise interest rates next year. The dollar index climbed 1.1 percent this week for a seventh straight gain, its longest run since June 2010.

The central bank has said it will keep rates low for a “considerable time” after asset purchases end, but any decision depends on the strength of the economy.

Making Progress

The dollar rose 1.3 percent to 109.79 yen after touching 110.09 yen on Oct. 1, the strongest level since 2008. It fell 1.1 percent during the previous two sessions. The U.S. currency gained 1.3 percent to $1.2516 per euro, and reached $1.2501, the strongest since August 2012. The yen rose 0.1 percent to 137.18 against the 18-member common currency.

“The Fed has to feel we’re making progress and it’s time for them to consider tightening,” said Richard Schlanger, who helps invest $30 billion in fixed-income securities as vice president at Pioneer Investments in Boston. “The market doesn’t seem to be concerned about inflation.”

In Europe, the Stoxx 600 rebounded from its lowest level since Aug. 15, trimming its weekly drop to 2.1 percent.

All but one of its 19 industry groups increased today, with travel and leisure shares climbing the most, as EasyJet Plc advanced 6.4 percent after saying full-year pretax profit jumped at least 20 percent. Banks posted the second-biggest gain as a group after a 3.3 percent slump yesterday.

Europe Bonds

Bonds in Europe were mostly lower as investors weighed the prospects for additional central-bank easing measures following the ECB’s decision yesterday to keep rates low. France’s 10-year yield increased two basis points to 1.27 percent and the rate on similar-maturity German debt climbed two basis points to 0.93 percent.

The MSCI Emerging Markets Index climbed 0.6 percent, halting a six-day slump that sent the measure to its most oversold level since June 2013 and valuations to the lowest since May 13. The gauge dropped 2.5 percent this week, a fourth straight decline and the longest stretch since June 2013.

The Ibovespa advanced 1.5 percent, paring a second straight weekly decline, after a poll showed President Dilma Rousseff won’t have enough votes in this weekend’s election to avoid a runoff.

Argentina’s Merval Index (MERVAL) rose 6.8 percent after dropping 15 percent in the previous two days.

Russian equities ended a two-day loss, with the Micex Index adding 0.6 percent. The gauge fell 3.5 percent this week, the most since July. The ruble depreciated for the sixth time in seven days, losing 0.5 percent versus the dollar.

Gold, Oil

The Hang Seng Index (HSI) increased 0.6 percent, reversing earlier losses as it opened after a two-day break. The Hang Seng China Enterprises Index of mainland companies listed in the city rose 0.4 percent. Chief Executive Leung Chun-ying agreed to demands by student leaders for talks after protests disrupted some of the city’s busiest areas.

Gold futures fell 1.8 percent to settle at $1,192.90 an ounce. More than $3.5 billion has been erased from the value of exchange-traded products backed by gold this year, and money managers are holding their smallest bullish bet since January.

An accelerating American economy means investors are shunning gold even after the U.S. expanded sanctions against Russia and ramped up its military campaign to combat Islamic State in Iraq. Rising interest rates reduce gold’s allure because the metal generally only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value.

Source:  Bloomberg