US equities fell after the latest batch of labor market data showed that hiring continued at a robust pace last month, bolstering expectations of an aggressive tightening of Federal Reserve monetary policy.
The S&P 500 blue-chip index fell 1.7%, with the high-tech Nasdaq Composite index up 2.7%.
The Labor Department’s report showed that the world’s largest economy created 390,000 jobs last month, just below April’s 436,000. However, May figures still exceeded expectations by 325,000.
Investors are watching the state of the labor market as they assess how quickly they expect the Fed to raise interest rates. Politicians have already raised the central bank’s key rate by 0.75 percentage points this year and are expected to continue a more aggressive tightening of monetary policy as they try to curb inflation. While the Fed seeks to encourage maximum employment, an overheated labor market could increase inflationary pressures.
Peter Boockvar, chief investment officer at Bleakley Advisory Group, noted that while the figures were not a “blast” performance, they still bolster expectations for an “aggressive Fed response”.
U.S. government debt suffered some selling pressure after the employment report, with the yield on the two-year Treasury note sensitive to monetary policy rising 0.05 percentage points to 2, 68%. The 10-year yield, which closely follows the long-term economic outlook, rose 0.05 percentage points to 2.96%.
Both benchmark bond yields have risen since the beginning of the year, but are down from their recent highs.
In equities, Tesla shares fell about 5 percent at the opening after Reuters reported that Elon Musk told employees he had a “super bad feeling” about the economy and that the maker of cars could have to cut their workforce by about 10%.
Meanwhile, the regional indicator Stoxx Europe 600 gave up previous gains, slowly for the day, after closing the previous session 0.6 percent higher. The German Dax also fell after the US Open. Markets in the United Kingdom were closed for a public holiday, as were markets in Hong Kong and mainland China.
European equities began to fall after retail sales in the eurozone fell 1.3% from the previous month, the first monthly drop since the beginning of the year. In year-on-year terms, sales increased by 3.9%. Economists surveyed by Reuters expected a monthly increase of 0.3% and an annual increase of 5.4%.
ING analysts said weak consumer confidence and high inflation had affected the region’s economy. “While this fall may exaggerate the evolution of total consumption, it provides further evidence of a severe slowdown in the eurozone,” they wrote.
The retail sales figure followed the strongest economic figures for Germany, with exports from the country rising by 4.4% between March and April.
Brent crude rose about $ 118 a barrel. OPEC and its allies reached an agreement on Thursday to accelerate oil production in July and August. The dollar index, which measures the U.S. currency against a basket of six others, rose 0.2 percent.