US Treasuries rallied and the dollar weakened on Tuesday after demand for workers in the world’s biggest economy fell more than expected.
The yield on two-year US Treasuries dipped 0.12 percentage points to 3.85 per cent as prices rose, while the yield on benchmark 10-year Treasuries fell 0.07 percentage points to 3.36 per cent. The dollar slipped 0.5 per cent against a basket of six other major currencies.
The moves came after data from the US Bureau of Labor Statistics showed job openings fell from 10.8mn in January to 9.9mn in February, the lowest monthly figure since May 2021. Economists polled by Reuters had expected a decline to 10.4mn.
Lay-offs fell by 215,000 to 1.5mn, while voluntary departures rose 146,000 to 4mn. They are considered more reliable figures than the volatile openings number.
Wall Street’s S&P 500 and the tech-heavy Nasdaq Composite were both trading 0.5 per cent lower on the news as markets weighed the potential impact of a cooling labour market on economic growth and inflation. Traders are split over whether the Federal Reserve will press ahead with a further quarter percentage point rate rise or leave borrowing costs unchanged when it next meets in early May.
US equities have recovered from losses in early March. “For a rational investor, we think this makes little sense,” JPMorgan said. “Most of the inflows” into stocks had been driven by a decline in volatility, systematic investors and those covering short positions, it added.
Torsten Slok, chief economist at Apollo Global Management, said the S&P’s 7 per cent rally this year against a backdrop of banking sector turmoil had been driven by 20 of the largest stocks, with the market cap of the remaining 480 having “basically not gone up”.
“The implication for investors is that this market is not driven by broad-based higher growth expectations, but instead by what has happened with rates, in particular after [Silicon Valley Bank] went under,” Slok added.
In commodity markets, Brent crude, the international oil benchmark, rose 0.6 per cent to $84.42 a barrel after jumping 6.4 per cent on Monday, following Saudi Arabia’s surprise move to implement a “voluntary cut” of 500,000 barrels a day, or just under 5 per cent of its output.
Opec+ member Russia also said it would extend its existing 500,000 b/d production cut until the end of the year. US marker West Texas Intermediate on Tuesday rose 0.3 per cent to $80.14 a barrel, having surged 6.3 per cent on Monday.
UBS said Brent could reach $100 a barrel by June, while JPMorgan expected prices to average $89 a barrel over the next three months before rising to $96 by the end of 2023.
Saudi Arabia and Russia’s reduction in supply was “a pre-emptive measure” designed to ensure surpluses that began accumulating in the global oil market in mid-2022 “don’t extend into the second half of 2023 as the global economy slows” because of higher interest rates, JPMorgan said.
Europe’s region-wide Stoxx 600 closed flat and London’s FTSE 100 fell 0.5 per cent. Sterling rose 0.7 per cent against the dollar.
Asian stocks were mixed. Hong Kong’s Hang Seng index closed down 0.7 per cent, Japan’s benchmark Topix index rose 0.2 per cent and China’s CSI 300 added 0.3 per cent.
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