Stocks, bond prices rise after weak U.S. jobs report

By Chuck Mikolajczak

NEW YORK (Reuters) - Bond prices jumped on Friday after a weak U.S. employment report increased worry about slowing global growth, while U.S. and European equities were able to rebound from earlier declines and rise modestly.

The economy created 142,000 jobs in September, well short of the 203,000 forecast, and August numbers were revised sharply lower to show only 136,000 jobs, the U.S. Labour Department said.

Bond prices jumped, with benchmark U.S. Treasury yields falling to their lowest level in slightly over 5 months. The 10-year U.S. Treasury note > was last up 12/32 in price to yield 2.0016 percent.

 

U.S. stocks managed to rebound from sharp declines, buoyed by gains in the beaten down energy and materials sector.

"The equity markets have already priced in a lot of weakness and the U.S. economy is still on track for a sustainable expansion despite the fact we had a soft ending to the third quarter," said Jeremy Zirin, head of investment strategy at UBS Wealth Management Americas.

"Investors should not extrapolate the weak payroll print we had over the past one or two months into the future."

Years of cheap central bank cash after the 2007-2008 financial crisis have supported asset prices, but recent signs of a slowdown in global economic growth, and the Fed's decision last month to postpone raising interest rates, have spooked investors betting on a return to more normal policy.

The weak jobs report likely pushes out the timeline for the Fed to raise interest rates for the first time in nearly a decade. Fed funds futures implied traders see nearly no chance the U.S. central bank would end its near-zero rate policy in October , according to CME Group's FedWatch programme, with a hike likely to occur in March 2016.

The Dow Jones industrial average <.DJI> rose 69.05 points, or 0.42 percent, to 16,341.06, the S&P 500 <.SPX> gained 8.12 points, or 0.42 percent, to 1,931.94 and the Nasdaq Composite <.IXIC> added 24.63 points, or 0.53 percent, to 4,651.71.

The pan-European FTSEurofirst 300 <.FTEU3> also erased early gains, buoyed by utility stocks, and closed down 0.4 percent. MSCI's all-country world stock index <.MIWD00000PUS> rose 0.4 percent.

The U.S. dollar index of major currencies <.DXY> which had advanced before the employment report was down 0.4 percent to 95.839 after hitting a two-week low of 95.218.

In contrast, gold prices reversed course and climbed more than 2.0 percent to last trade at $1,139.06 an ounce, on track for the biggest percentage gain in a week. They had fallen to a two-week low before the report. Silver > advanced 5 percent, its biggest percentage gain since December, to $15.18 an ounce.

Concerns about U.S. monetary policy and a slowdown in emerging markets led by China have hit commodities markets and related stocks, like Glencore , this week and ramped up volatility.

After earlier declines, copper also moved higher and was up 1.1 percent to $5,150 per tonne, as the increased possibility the Fed will hold off on a rate hike tempered growth worries.

U.S. crude gained 1.7 percent to $45.48 per barrel. Brent advanced 0.9 percent to $48.10 after a report showing the fifth weekly decline in the U.S. oil rig count added to signs of falling production in the world's top oil consumer.

(Reporting by Chuck Mikolajczak; editing by Clive McKeef and Nick Zieminski)