181219 US fed
A cyclist passes the Federal Reserve building in Washington, DC, U.S., August 22, 2018. Image Credit: Reuters

New York: A strong US jobs report that tempered expectations of an aggressive interest rate cut by the Federal Reserve later this month and weak economic data in Germany helped push global stock indices lower on Friday after hitting record highs earlier this week.

Yields on benchmark 10-year Treasury notes rose back above 2.0 per cent after hitting their lowest since November 2016 on Wednesday.

Non-farm payrolls increased by 224,000 last month as government employment rose by the most in 10 months, the US Labour Department reported.

The better-than-expected showing reduced the likelihood the Fed will cut interest rates at its next meeting later this month. Expectations of an equity-friendly rate cut helped push the S&P 500 to record highs earlier this week.

“Obviously, this was a key report for the Fed as well in determining their path in the near term, and with markets fully pricing in a July rate cut and several thereafter, the stronger-than-expected report is likely to throw cold water on those fairly dovish expectations,” said Candice Bangsund, asset allocation manager at Fiera Capital.

MSCI’s gauge of stocks across the globe shed 0.42 per cent.

On Wall Street, the Dow Jones Industrial Average fell 43.88 points, or 0.16 per cent, to 26,922.12, the S&P 500 lost 5.41 points, or 0.18 per cent, to 2,990.41 and the Nasdaq Composite dropped 8.44 points, or 0.1 per cent, to 8,161.79.

Market volume in the US was light due to the holiday-shortened week.

The losses in the US market followed broad dips in European equities after German data showed industrial orders had fallen far more than expected in May, and a warning from the economy ministry that this sector of Europe’s largest economy was likely to remain weak in the coming months.

“Devastating new orders data just undermined any hopes for an industrial rebound. We are starting to lose our optimism,” said Carsten Brzeski, chief economist at ING Germany.

“Combined with the weakest June performance of the labour market since 2002 and disappointing retail sales, today’s new orders wrap up a week to forget for the German economy. The fear factor is back.” The pan-European STOXX 600 index lost 0.72 per cent.

Benchmark 10-year notes last fell 24/32 lower in price to yield 2.0373 per cent, from 1.955 per cent late on Wednesday.

The dollar index rose 0.5 per cent, with the euro down 0.53 per cent to $1.1224.

Brent crude futures, the international benchmark for oil prices, gained 1.5 per cent to $64.27 per barrel while US crude rose 0.4 per cent to $57.59.