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After a jolt, the dollar and UK bonds are stable after strong US jobs data

The dollar and Wall Street rose on Thursday as the U.S. employment data was strong. In Europe, Britain's bonds recovered from renewed debt concerns.

The announcement of a trade deal between the United States of America and Vietnam before the deadline for worldwide U.S. tariffs next week encouraged bulls over night. And the strong U.S. job numbers helped the dollar double the gains of the day and ensured that the S&P 500 opened at new all-time highs.

The Labor Department reported on Thursday that nonfarm payrolls grew by 147,000 jobs after increasing 144,000 in May. The economists polled predicted that 110,000 new jobs would be added in June.

As traders delayed the timing of Fed rate cuts, they accompanied the rise in stocks and dollar with a surge in U.S. Treasury Yields.

The yield on the 2-year note, which is usually in line with expectations of interest rates from the Federal Reserve, increased 8.9 basis points, to 3.88%. The yield on the benchmark U.S. 10 year notes increased 4.9 basis points to 4,342%

Seema Sha, Principal Asset Management's Chief Global Strategist said that the fact that payrolls were higher than expected, the drop in unemployment rates, and the fall in claims for joblessness "completely dispels the argument" of imminent rate cuts.

She added that it "implies there is no absolute urgency for Fed support" and predicted no cuts until the end of the year.

The pan-European STOXX 600 Index remained 0.4% higher, and MSCI's main 47 country world shares gauge remained on track for its seventh highest record in the last eight session.

The bonds of Britain recovered some of the losses suffered on Wednesday due to uncertainty about Finance Minister Rachel Reeves’ future. However, they remained lower than recent levels.

The 20-year bond yield, a proxy for longer-term borrowing costs by the UK government, has eased 8 basis points since its highest spike on Wednesday in October 2022, during Liz Truss' ill-fated tenure as premier.

Reeves' tearful appearance in parliament raised questions about Reeves' future and Britain’s public finances, after the government had to abandon billions of pounds of cuts in welfare spending.

Susannah Streeter is the head of money markets and financial services at Hargreaves Lansdown.

Analysts were closely watching the data after the private sector payrolls report, released on Wednesday, surprised them with its first decline in more than two years.

Investors also waited to see if the tax and spending bill of U.S. president Donald Trump was passed by Congress. According to nonpartisan analysts, the bill will add $3.3 trillion over the next 10 years to the United States’ $36 trillion national debt.

Ding Ding

The U.S. announced overnight that it had reached a deal with Vietnam. This included a 20% tariff for exports to the U.S., which is still higher than the previous rate of 46%.

Vietnamese shares rose 0.5%, the most since April 2022. However, the dong currency fell to a record low at 26,229 dollars per dong.

Shane Oliver is the chief economist of AMP. He said, "Although more trade deals will be announced soon, the 20 percent tariff with Vietnam is not a good sign. That or even higher rates could become the standard for many, including Europe and Japan."

In fact, Japan invoked its national interests when talks with the U.S. stalled, and South Korean President Lee Jae Myung stated on Thursday that U.S. Tariff negotiations looked difficult, but he couldn't say if they could be concluded by next Tuesday.

MSCI's broadest Asia-Pacific share index closed 0.3% higher. China's blue chip index rose 0.6% as weak services data led to expectations of further stimulus. Japan's Nikkei, meanwhile, finished flat.

The dollar is still barely above its three-year low despite the payrolls increase. The pound was at risk of stagnating again after Wednesday's 0.8% drop.

Futures indicate less than 25% likelihood of a Fed rate cut in this month. The Fed hasn't eased its policy this year and Trump is furious. He reiterated on Wednesday his call for Jerome Powell, the Fed Chair, to resign.

Trump has been berating Powell since his January return to the White House for failing to lower borrowing costs. Trump said that rates should be reduced to 1%, from the current Fed benchmark rate of 4.25%-4.50%.

UBS' survey of reserve managers on Thursday revealed that two thirds believe the Fed's independence is in danger and nearly half believe the U.S. rule of law may be deteriorating to the point where it could influence their asset allocation.

Oil prices dropped on the commodities market after a 3% increase overnight, as Iran suspended its cooperation with U.N.'s nuclear watchdog.

Brent crude futures fell 0.8% to $68,64 per barrel. U.S. crude oil was down 0.7% on the day. Gold prices fell 0.1%, to $3352 per ounce. (Reporting and editing by PhilippaFletcher; Marc Jones)

(source: Reuters)