Dollar gains, stock rally ebbs after labor report

NEW YORK (Reuters) – The dollar bounced off two-year lows and a gauge of global equity markets halted a march toward a record high on Friday as slightly better-than-expected data on U.S. job growth in July also snapped big rallies in gold and the euro.

The Labor Department report showed employment growth slowed considerably from June amid a surge in COVID-19 cases, which is likely to renew pressure on the White House and Congress to reach an agreement on a new stimulus bill.

Gold slid 2% to snap its record surge this week above $2,000, the euro fell from highs against the dollar last seen in May 2018 and U.S. Treasury yields rose to stop a downward trend that had the benchmark 10-year note poised to fall below 0.5%.

European equities eked out modest gains, with the pan-regional FTSEurofirst 300 index .FTEU3 adding 0.27%. But the euro’s sharpest sell-off since April helped Germany’s export-heavy DAX index .GDAXI to close up 0.66%.

Stocks on Wall Street meandered, with the S&P 500 and Nasdaq briefly turning positive.

The Dow Jones Industrial Average .DJI fell 0.05%, the S&P 500 .SPX gained 0.04% and the Nasdaq Composite .IXIC dropped 0.44%.

Michael Brown, senior analyst at payments firm Caxton in London, said the unemployment report painted a strong picture of the jobs market but the economic recovery remains fragile and dependent on the progress of the pandemic.

Financial markets are focused on the potential passage of another stimulus bill in Congress, said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

“As the day goes on, we’ll see more and more discussion about how today’s employment report affects those negotiations,” LeBas said.

Also weighing on markets was U.S. President Donald Trump’s sweeping bans unveiled late Thursday on U.S. transactions with the Chinese owners of messaging app WeChat and video-sharing app TikTok.

In response, China said the companies complied with U.S. laws and warned Washington would have to “bear the consequences” of its action.

Chinese stocks led losers in Asia and the yuan slumped after Trump issued executive orders to purge “untrusted” Chinese apps from U.S. digital networks.

Graphic – Emerging markets: here

MSCI’s benchmark for global equity markets .MIWD00000PUS fell 0.36% to 563.12.

Latest Bank of America fund flow statistics also confirmed the undercurrent of caution in global markets, with investors flocking to cash, gold and investment-grade bonds and switching out of equities.

Gold XAU= hit a record high of $2,075.2 per ounce earlier in the session, before succumbing to profit-taking.

Spot gold prices XAU= fell -1.73% to $2,027.46 an ounce.

Silver dropped 1.7% to $28.452 per ounce XAG= following its rise to a seven-year high of $29.838.

Oil prices fell more than 1%, pulling back from a week of gains.

Brent crude futures LCOc1 fell $0.62 to $44.47 a barrel. U.S. crude futures CLc1 slid $0.63 to $41.32 a barrel.

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