The dollar climbed to a five-year high, U.S. stocks rose toward records and Treasuries fell after American payrolls beat estimates, as a strengthening economy bolstered the case for higher rates. European equities gained on German factory data amid speculation for more stimulus.
The Bloomberg Dollar Spot Index jumped 0.7% at 9:34 a.m. in New York, as the greenback surged to 121.19 yen. The 10- year Treasury yield increased five basis points to 2.29%. The Standard & Poor’s 500 Index added 0.2%, headed for a seventh weekly gain. The Stoxx Europe 600 Index surged 1.5% and Italy’s 10-year yield dropped to a record 1.948%. Gold sank 0.9% and Brent crude dropped for a fourth straight day.
Employers in the U.S. added 321,000 jobs in November, driving wage gains and highlighting increased corporate confidence the economy will endure a global slowdown. The Federal Reserve is weighing jobs growth as it decides when the economy is strong enough to withstand higher rates. European equities rebounded from the biggest drop in seven weeks after two officials familiar with deliberations said the central bank will consider a proposal for broad-based asset purchases at the next monetary-policy meeting on Jan. 22.
“We’re seeing another piece of evidence pointing to continued growth,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said in a phone interview. “Is the Fed now more likely to raise rates sooner than later? That’s probably muting what would’ve been a much stronger reaction in the equity market to pretty good numbers.”
The advance in payrolls exceeded the most optimistic projection in a Bloomberg survey of economists. The jobless rate held at a six-year low of 5.8%. Average hourly earnings rose 0.4%, the biggest gain since June of last year.
Fed policy makers said they plan to raise interest rates in 2015, even as the outlook for global inflation remains low with the price of crude oil down more than 35% this year. They meet Dec. 16-17.
“Today’s number brings expectations of an interest rate increase in a little bit,” Chris Gaffney, senior market strategist at EverBank Wealth Management in St. Louis, said via phone. “Two months ago numbers like these may have been bad for stocks but maybe we’re at the point where the market thinks the economy can grow without the Fed pumping money into it.”
Benchmark Treasury 10-year note yields rose to the highest level since Nov. 24, while two-year note yields added nine basis points to 0.64%, reaching the highest since April 28, 2011.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 trading partners, headed for its highest close since March 2009. It is up 1.1% this week, poised for a seventh straight weekly advance.
The greenback rose 0.5% to $1.2316 per euro and reached $1.2279, the strongest level since August 2012. The U.S. currency climbed 1.1% to 121.10 yen after touching 121.39, the most since July 2007. Japan’s currency fell to a six-year low of 149.17 versus the euro, before trading 0.6% lower at 149.15.
“This is likely to not only keep the Fed on track to raise rates around the middle of next year, but could begin to spark talk of a potentially earlier interest-rate hike by the Fed,” Omer Esiner, chief market analyst at the currency brokerage Commonwealth Foreign Exchange Inc. in Washington, said by phone. “And, of course, all of this is very positive for the dollar.”