By Sinéad Carew and Samuel Indyk
NEW YORK/LONDON (Reuters) -MSCI’s global equities index sold off sharply on Friday and the dollar took a dive after weaker-than-expected U.S. jobs data fueled economic worries and boosted bets for September interest rate cuts while investors also considered U.S. President Donald Trump’s latest tariff announcements and key personnel changes.
U.S. Treasuries were in demand after the Labor Department reported that the U.S. economy added 73,000 nonfarm payrolls last month, below economists’ expectations for 110,000. June’s job growth was revised sharply lower to 14,000 from 147,000.
After the report, Trump said he ordered his team to fire the commissioner of the U.S. Bureau of Labor Statistics, Erika L. McEntarfer, nominated by prior President Joe Biden for the role.
Then the dollar index and U.S. Treasury yields lost further ground when the Federal Reserve said Governor Adriana Kugler is resigning early from her term on Aug. 8, causing some investors anxiety at a time when Trump has loudly disagreed with Fed rate policies.
Late on Friday, traders were betting on an 87.5% probability for a September rate cut compared with 37.7% on Thursday, according to CME Group’s FedWatch tool.
“The market is reacting to the possibility of the economy flipping into recession. The weak jobs data is piling on to weak earnings reports and weak guidance from some corporations,” said Luke Tilley, Chief Economist, Wilmington Trust.
MSCI’s gauge of stocks across the globe fell 12.23 points, or 1.32%, to 917.39, suggesting its biggest daily drop since mid-April. The softer jobs data added to losses for the global index, which was already in the red after a host of tariff announcements from Trump the day before.
On Thursday, Trump ordered tariffs ranging from 10% to 41% on U.S. imports from several major trading partners. He increased duties on Canadian goods to 35% from 25% for all products not covered by the U.S.-Mexico-Canada trade agreement. He set a 25% rate for India’s U.S.-bound exports, 20% for Taiwan’s, 19% for Thailand’s and 15% for South Korea’s.
Mexico, however, got a 90-day reprieve from higher tariffs to allow for deal talks.
On the earnings front, market heavyweight Amazon tumbled more than 8% on Friday after its quarterly report showed cloud computing growth that disappointed investors.
On Wall Street, the Dow Jones Industrial Average fell 542.40 points, or 1.23%, to 43,588.58, the S&P 500 fell 101.38 points, or 1.60%, to 6,238.01, for its biggest one-day percentage drop since May 21 and the Nasdaq Composite fell 472.32 points, or 2.24%, to 20,650.13, its steepest one-day drop since April 21.
Earlier, the pan-European STOXX 600 index ended down 1.89%, its biggest drop since April 9.
In currencies, the greenback reversed course to fall sharply after the data due to increased expectations for rate cuts. Earlier it had found support in fading hopes for U.S. rate cuts.
The dollar index, which measures the greenback against major currencies including the yen and the euro, fell 1.37% to 98.66, the euro was up 1.52% at $1.1589. Against the Japanese yen, the dollar weakened 2.26% to 147.32.
“The way (the market) is going to interpret (the departures) is in a very dollar-negative way,” Juan Perez, senior director of trading, Monex USA, referring to both the Kugler and McEntarfer news.
“No matter what the economic picture in the United States, the one thing that holds the U.S. dollar strong in the eyes of the world is the authority and the independence of the Federal Reserve. Whenever anything comes to potentially put that into compromise then that’s when the U.S. dollar spirals down.”
U.S. Treasury yields plunged on the jobs data and the increased bets for September rate cuts, and fell to fresh session lows in the late afternoon after the Kugler announcement.
Peter Tuz, president of Chase Investment Counsel, said Trump “is getting a bigger chance to appoint people whose views match his own” at the Fed. Regarding the BLS firing Tuz said “I don’t like to see a bureaucrat fired just because the data that gets presented doesn’t support the administration’s policies.”
The yield on benchmark U.S. 10-year notes fell 14 basis points to 4.22%, from 4.36% late on Thursday. The 30-year bond yield fell 6.4 basis points to 4.8211%.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 26.1 basis points to 3.69%.
In energy markets, oil prices sank about 2.8% after the jobs data and on jitters about a possible production increase by OPEC and its allies. Oil had settled around 1% lower on Thursday.
U.S. crude settled down 2.79%, or $1.93 at $67.33 a barrel and Brent settled at $69.67 per barrel, down 2.83%, or $2.03 on the day.
Elsewhere in commodities, gold prices rallied to a one-week high as investors sought safety after the weak jobs report, policy easing expectations and the latest tariff announcements.
Spot gold rose 2.14% to $3,360.45 an ounce.
(Rporting by Sinéad Carew, Gertrude Chavez-Dreyfuss, Samuel Indyk, Nell Mackenzie, Stella Qiu and Rae Wee. Editing by Andrew Heavens, Mark Potter, Alexandra Hudson, Diane Craft and Sandra Maler)
