Friday, January 18, 2019
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Dollar Climbs on U.S. Jobs Data as Treasuries Retreat

The dollar strengthened and Treasuries fell after American payrolls rose more than forecast and the jobless rate tumbled. The ruble weakened and Ukraine bonds declined as the government in Kiev sent troops to retake a rebel stronghold.

The dollar gained against most of its major counterparts, advancing 0.5 percent to 102.84 yen at 9:48 a.m. in New York. The 10-year Treasury yield jumped four basis points to 2.66 percent. The Standard & Poor's 500 Index fluctuated after rising to within one point of its all-time high on a closing basis. The Stoxx Europe 600 Index was little changed. The S&P GSCI gauge of 24 raw materials climbed 0.2 percent led by oil and wheat. Royal Bank of Scotland Group Plc rallied after profit tripled. The ruble slid 0.5 percent against the dollar.

U.S. nonfarm payrolls rose last month by the most in two years and the jobless rate fell to 6.3 percent, a sign that economic growth is poised to accelerate as the Federal Reserve pares monthly bond-buying and considers when to raise interest rates. Ukraine sent armored vehicles and artillery to retake Slovyansk, a stronghold for pro-separatist forces, defying a demand by Russian President Vladimir Putin to pull back troops.

"It's a pretty strong report that suggests the Fed will continue to taper," Anthony Valeri, a market strategist with LPL Financial Corp. in San Diego, said in a phone interview. The firm oversees $350 billion. "This is the first strong confirmation we're unwinding some of the winter weakness. I think it keeps the Fed rate hike in 2015 very much on track."

U.S. employers added 288,000 workers, the biggest gain since January 2012 and followed a revised 203,000 increase the prior month that was stronger than initially estimated, Labor Department figures showed. The median forecast in a Bloomberg survey of economists called for a 218,000 advance.
Fed Stimulus

The Fed said it will keep the benchmark interest rate close to zero for a "considerable time" after its bond-buying program ends. It reduced monthly debt purchases to $45 billion, its fourth straight $10 billion cut, and said further reductions in "measured steps" are likely.

The Bloomberg Dollar Spot Index, which monitors the greenback against 10 major counterparts, rose 0.3 percent to erase losses for the week. The dollar advanced 0.4 percent to $1.38141 per euro after weakening to $1.3889 yesterday, the least since April 11. The common currency rose 0.1 percent to 142.09 yen.

U.S. 10-year note yields are little changed for the week after yesterday falling to a two-week low. Thirty-year bond yields fell to a 10-month low yesterday as weaker-than-forecast economic signals before the jobs report led traders to unwind hedges against higher interest rates.
New Highs

The S&P 500 has climbed 1.1 percent this week and came within four points of its April 2 record. The Dow Jones Industrial Average added fluctuated today near its all-time high.

"This report should push it towards new highs," Valeri said. "If it doesn't, it's a sign that stocks would like to see how earnings play out and maybe need another catalyst before we break new highs."

The drop in the unemployment rate from March's 6.7 percent came as the agency's survey of households showed the labor force shrank by more the 800,000 in April. The so-called participation rate, which indicates the share of working-age people in the labor force, decreased to 62.8 percent, matching the lowest level since 1978, from 63.2 percent a month earlier.
Little Disappointing

"While the headline certainly suggests conditions are improving, you also need to focus on the labor force participation rate," Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., which oversees $290 billion, said in a phone interview. "It's a little disappointing as people continue to drop out of the labor force."

The Stoxx 600 rose fell 0.1 percent, trimming its weekly advance to 1.4 percent.

Royal Bank of Scotland, Britain's largest state-owned lender, jumped 9.9 percent. Net income rose to 1.2 billion pounds ($2 billion), beating the 200 million-pound average estimate from eight analysts.

The MSCI Emerging Markets Index advanced 0.3 percent, headed for their first weekly gain since the period ended April 11. Turkey's benchmark gauge climbed 1.9 percent after a 2.2 percent gain on April 30. Central bank Governor Erdem Basci said two days ago policy makers could cut key interest rates if a recent drop in the country's risk premium holds.
Ukraine Tension

Russia's Micex Index (INDEXCF) slipped 0.4 percent, after losing as much as 1.1 percent. The gauge dropped 4.6 percent in April, its fourth consecutive monthly decline. The yield on Ukraine's April 2023 Eurobond rose 20 basis points to 10.85 percent, the highest in more than six weeks.

Interior Ministry forces were dispatched today to displace the militants from seized buildings and free hostages, including eight international monitors, minister Arsen Avakov said today on Facebook. Rebels shot down two helicopters using air-defense systems, killing two pilots, the Defense Ministry said. Local media said 10 foreign media workers were missing.

The S&P GSCI commodities index trimmed its loss this week to 1.3 percent. Sugar fell 1 percent to pace declines today.

To contact the reporters on this story: Stephen Kirkland in London at This email address is being protected from spambots. You need JavaScript enabled to view it. ; Jeremy Herron in New York at This email address is being protected from spambots. You need JavaScript enabled to view it.

To contact the editors responsible for this story: Lynn Thomasson at This email address is being protected from spambots. You need JavaScript enabled to view it. Jeremy Herron, Stephen Kirkland


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