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Bonds calm as investors hope for subdued U.S. payrolls data

by Mark Mendoza

Bonds and shares experienced a calmer day on Friday, October 6, after a pause in the recent sell-off that was driven by concerns over rising interest rates. Investors are hoping for a subdued U.S. payrolls number, and the firmer dollar is set to achieve a 12-week winning streak. Crude oil prices are up slightly, but facing the steepest weekly decline since March as concerns about the impact of higher interest rates on global economic growth and fuel demand persist. Ten-year U.S. Treasury yields were stable after a five-week selloff that has affected bond markets and risk appetite worldwide. The MSCI All-Country stock index gained slightly, but has lost about 8% since its July peak. In Europe, the STOXX 600 index rose 0.5% for a second straight session, but is still on track for its third consecutive week of losses after a six-month low. Analysts are uncertain about the implications of the retreat in oil prices and the bond sell-off for the dollar and future interest rates. U.S. job growth is expected to have moderately slowed in September, but unemployment is predicted to have retreated from its 1-1/2 year high. Some analysts argue that the decline in bond prices and the increase in the stock market fear index are due more to concerns about high government deficits rather than expectations of more rate hikes. U.S. stock futures were firm, supporting shares in Europe. Market responsiveness to U.S. labor data this week shows the importance of employment-related figures in shaping the near future. The dollar is expected to continue its winning streak against the euro, while only the yen has shown much resistance. Gold prices have remained steady after nine days of losses caused by rising global bond yields.

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