Stock indexes around the globe traded mixed on Friday despite strong Amazon earnings, while gold prices slipped under pressure from a firmer dollar and higher U.S. Treasury yields as upbeat U.S. jobs data bolstered the case for Federal Reserve rate hikes.
Earlier in the session, a sell-off in bonds briefly pushed Germany’s 5-year yield positive for the first time in four years after the European Central Bank was more hawkish than expected.
Asian equities held firm overnight after better-than-expected earnings from Amazon, in contrast to the heavy selling on Thursday following Facebook owner Meta Platforms’ earnings miss.
The STOXX 600 lost 1.42% and MSCI’s gauge of stocks across the globe gained 0.18%.
On Wall Street, U.S. stocks were mixed. U.S. government bond yields moved up amid the positive jobs data and better earnings.
“So much for the good news from Amazon – today’s jobs data puts 50 basis points back on the table for the Fed’s March meeting,” said John Lynch, chief investment officer.
The Dow Jones Industrial Average fell 0.25% and the S&P 500 gained 0.18%. The Nasdaq Composite added 0.97%.
Market sentiment has been dominated by speculation about the trajectory for rate hikes from major central banks this year, as pressure mounts for policy moves to combat inflation. Rate hikes typically hurt riskier assets such as stocks.
In a move labeled by analysts as a “pivot,” European Central Bank President Christine Lagarde was more hawkish than expected at the central bank’s meeting on Thursday. She acknowledged mounting inflation risks and declined to repeat her previous guidance that an interest rate increase this year was “very unlikely.”
The dollar index rose 0.091%, with the euro up 0.11% to $1.1451.
“Central banks are actively trying to tighten financial conditions … they are moving faster than expected,” said Colin Asher, senior economist.
European government bond yields also rose. Germany’s 5-year yield briefly turned positive as traders priced in ECB rate hikes this year. Germany’s 2-year yield was set for its biggest weekly rise since 2008.
Yields on benchmark 10-year U.S. Treasury notes hit their highest levels since December 2019 after strong payrolls data showed the U.S. economy added 467,000 jobs last month.
Morgan Stanley said markets were now facing “the largest quantitative tightening in history” from May onwards, with G4 central bank balance sheets set to shrink by $2.2 trillion over the next 12 months.
But Australia’s central bank was still content to keep policy ultra-loose in its quarterly statement on monetary policy, even as it sharply revised up its outlook for inflation and projected unemployment at 50-year lows.
The Bank of Japan also brushed aside the view it could follow in the footsteps of its more hawkish U.S. and European peers.
The cryptocurrency bitcoin has strengthened in the past week but, at just under $38,000, remains far below the all-time high of $69,000 it hit last November.
Oil prices surged to seven-year highs on Friday, headed for a seventh straight weekly increase built on ongoing worries about supply disruptions fueled by frigid U.S. weather and political turmoil among major world producers.