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U.S. stocks rise with treasuries after jobs data; pound advances

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(Bloomberg) — U.S. stocks rose with Treasuries after a rebound in payrolls data boosted optimism the economy is accelerating, but not fast enough to warrant higher borrowing costs in June. The pound strengthened with U.K. stocks as Conservatives won a majority in elections.

The Standard & Poor’s 500 Index added 1.2 percent at 10:13 a.m. in New York. The yield on 10-year Treasuries fell six basis points to 2.12 percent, paring a weekly rise in rates. The Bloomberg Dollar Spot Index was little changed. Shares in Europe surged the most since January, while sterling gained 1.5 percent and U.K. stocks rebounded from a one-month low.

Payrolls rebounded in April and the unemployment rate fell to the lowest since May 2008, a sign companies are confident the U.S. economy will reboot after growth slowed in the first quarter. While a futures-based measure indicates the Federal Reserve remains on track to raise rates this year, the data make a hike in June less likely.

“This is just-right jobs for stocks,” Darrell Cronk, president of Wells Fargo Investment Institute in New York, said by phone. “We hit it right where we needed to be, not too much and not too little. You want an economy growing north of 200,000 jobs but if you get closer to 300,000 you start to have conversations about inflationary pressures and the economy heating up too fast, so this number is perfect.”

U.S. employers added 223,000 workers to nonfarm payrolls in April, after a 85,000 increase in March that was the smallest since June 2012. The unemployment rate fell to 5.4 percent from 5.5 percent, the lowest since May 2008. Average hourly earnings climbed less than forecast.

Rate odds

The odds of a Fed interest-rate increase in December are 55 percent, according to CME Group Inc. calculations of fed funds futures prices. The odds of a January 2016 hike are 71 percent.

“You’re feeling a big sigh of relief in the capital markets,” Michael Arone, the Boston-based chief investment strategist at State Street Global Advisors’ U.S. Intermediary Business, said by phone. The firm oversees $2.4 trillion. “The jobs report is not indicating the economy is overheating and it’s certainly not indicating the economic environment is further on the decline.”

The S&P 500’s advance Friday erased a loss for the week that was spurred by concern the economy was slowing as the Fed considers raising rates. The Treasury price gains softened losses rung up during the past two weeks amid a global selloff in fixed-income securities. Ten-year yields touched 2.31 percent Thursday, the highest since Dec. 8. After a nine-month rally, the dollar has slumped since the middle of April. It added 0.4 percent versus the euro to $1.1225 on Friday.

The results of the U.K. election boosted European equities Friday, with all Stoxx 600 industry groups advancing as the index erased a weekly decline. Conservatives defied opinion polls to defeat the Labour Party, as the Tories won a majority in Parliament in a result that allows Prime Minister David Cameron to govern alone.

“The main issue was the potential instability of the final government,” said Vatsala Datta, a U.K. rates strategist at Royal Bank of Canada in London. “That risk has been eliminated now. A lot of pent-up demand may emerge.”

The pound strengthened as much as 2.2 percent versus the euro and rose 1.3 percent to $1.5441.

The U.K.’s FTSE 100 Index rallied 1.8 percent for the biggest gain among western-European markets after Ireland. British lenders Lloyds Banking Group Plc, Royal Bank of Scotland Group Plc and Barclays Plc rallied more than 4 percent.

Syngenta AG, the world’s largest maker of agrochemicals, rejected Monsanto’s 41.7 billion Swiss-franc ($45 billion) offer because it undervalued the company.

The MSCI Emerging Markets Index added 1 percent, trimming losses this week to 1 percent.

The Shanghai Composite Index advanced 2.3 percent. The gauge dropped 5.3 percent in the week on concern new share sales will sap funds and after valuations jumped to five-year highs. Hong Kong’s Hang Seng China Enterprises Index gained 2 percent, the steepest advance since April 21.

China data

China’s exports unexpectedly declined in April with shipments falling 6.2 percent, compared with the estimate for a 0.9 percent gain. Imports slid 16.1 percent, the fourth straight double-digit decline. The central bank has cut benchmark interest rates and banks’ reserve ratios twice in the last six months to cushion an economic slowdown.

India’s S&P BSE Sensex climbed 2.1 percent, after closing more than 10 percent below its Jan. 29 record high on Thursday.

Russia’s ruble slipped 1.2 percent, trimming this week’s gain to 1.6 percent. The ruble has climbed 19 percent this year, the world’s best performing currency, after a rebound in oil and a cease-fire in Ukraine.

Copper gained 0.4 percent in London as imports of the metal into China rose to the highest in a year. Copper has climbed in 10 of the past 11 days and entered a bull market earlier this week. Gold for immediate delivery added 0.3 percent to $1,187.66 an ounce, heading for the first weekly advance in four weeks.

– With assistance from Lukanyo Mnyanda in Edinburgh, Paul Dobson, Cecile Vannucci, Lynn Thomasson, Sofia Horta e Costa and David Goodman in London, Phoebe Sedgman in Melbourne, Oliver Renick in New York and Emma O’Brien in Wellington.

See also:

Warren Buffett’s 10 nuggets of wisdom from the Berkshire meeting, 2015

U.S. worker pay, benefit costs rise in first quarter

Prudential Plc’s new CEO signals plans to build on Asia strategy

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