Shares fell sharply on Friday after a blowout jobs report fueled bets of a rate hike by the US Federal Reserve and as investors turned defensive ahead of the weekend, wary of the flare-up in Middle East hostilities.
Iran reaffirmed support for the Hezbollah militia and demanded Israel withdraw from southern Lebanon, complicating efforts to end the broader conflict between the US and Iran. Israel has said it would not withdraw troops from Lebanon.
On Wall Street, all three indexes ended lower, led by a selloff in technology shares, including AI chipmaker Nvidia. Shares in Broadcom fell nearly 8 per cent, continuing losses since the semiconductor company reported underwhelming results on Wednesday.
The Dow Jones Industrial Average fell 1.4 per cent, the S&P 500 lost 2.64 per cent and the Nasdaq Composite dipped 4.2 per cent.
Data showed US employers added far more jobs than expected in May, bolstering bets that the Fed could raise rates late this year.
US Treasury yields surged following the report, with the yield on the 2-year note, which typically moves in step with Fed rate expectations, hitting a 15-month high. It was last at 4.147 per cent.
“We’re talking about a strong economy,” said Gary Schlossberg, market strategist at Wells Fargo Investment Institute.
“That just adds to inflation risk coming from the Gulf. It makes it difficult for the Fed to even think about rate cuts and might even increase the chances – although we’re still not forecasting that yet – of a rate hike by the Fed before the end of the year against the backdrop of inflation.”
The pan-European STOXX 600 index eased 0.29 per cent. MSCI’s gauge of stocks across the globe fell 2.27 per cent.
“There are some near-term pressures on the short end of the curve and it’s largely because of the geopolitical impact on the price of oil and headline inflation, but looking through that, we also understand that these pressures tend to be temporary and calm back down,” said Talley Leger, chief market strategist at the Wealth Consulting Group.
Oil set for weekly gain
Oil prices slipped after Oman said operations at Mina al Fahal port were proceeding normally following a Reuters report that oil loadings had been suspended after an explosion.
Brent crude futures fell 2 per cent to settle at $93.09 a barrel and US crude dipped 2.69 per cent to $90.54 per barrel, with both contracts set to post their first weekly gains in three weeks.
In currencies, the yen settled around the 160 per dollar level and was last down 0.11 per cent at 160.19, as Japanese officials ramped up warnings about the ailing currency, keeping traders on alert for further intervention from Tokyo.
Data on Friday showed Japan’s foreign reserves fell by $77 billion in May.
The euro was down 0.73 per cent at $1.1524. Sterling weakened 0.63 per cent to $1.3336.
The dollar index was on track to gain 0.62 per cent, supported by the Middle East conflict. Cryptocurrencies extended recent declines, with bitcoin shedding 3.88 per cent to $61,156.75 and heading for a weekly decline of nearly 18 per cent, its biggest since the week FTX collapsed in November 2022, while ether declined 9.85 per cent to $1,598.01.
Spot gold fell 3.38 per cent to $4,322.85 an ounce.
