INDONESIA

The US jobs report just set off some seriously sharp moves in the markets

It seems that it’s finally getting through to the US financial markets: The US jobs pictures is getting noticeably brighter. Here’s how a few key asset classes reacted to today’s positive employment news.

The biggest move seems to have been in the US bond market, where interest rates jumped sharply.

  • A better jobs picture means it’s more likely that the Federal Reserve starts to taper off the pace of the bond-buying program—known as quantitative easing, or QE—it put in place to shore up the economy. The yield on the benchmark US 10-year note hit 2.71% in the wake of the report. That’s its highest since way back in the summer of 2011.
US-10-year-Treasury-note-yield_chart

But the stock market doesn’t seem to think that higher interest rates will choke off economic growth.

  • US stocks jumped at the open in the wake of the jobs numbers. They’re up a modest 0.3% at last glance. But they’re losing altitude.
S-P-500-stock-index_chart (5)

Gold continues to get clobbered.

  • This is also because the Fed seems more likely to scale back its QE programs, which inflationistas have been claiming would cause a problematic US price spiral. It never happened. As a result the yellow metal is one of the worst performing asset classes over the last year, down roughly 23%.
NYMEX-gold-futures-per-troy-ounce_chart (1)

And investors flocked to the dollar.

  • If the Fed scales back its money-creation programs—that’s essentially what QE is—that’s a good thing for the dollar, as it means the central bank won’t effectively be creating as many dollars as many thought. That also reduces the inflation-related risks of holding greenbacks. Here’s a look at the ICE US dollar index, which tracks the US dollar against a basket of trade-weighted currencies.
ICE-US-Dollar-index_chart
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