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U.S. stocks climb with dollar, bonds slipping on China, Labor data

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(Bloomberg) — Global markets stabilized, with U.S. stocks halting a two-day rout and the dollar advancing after China shored up its markets and a surge in U.S. payrolls boosted optimism in the economy. Oil fluctuated near $33 a barrel.

The Standard & Poor’s 500 Index rebounded from a selloff that has erased $4 trillion from global equities this year as Chinese authorities set a higher yuan reference rate and intervened in its equities markets. The Bloomberg Dollar Spot Index held to a 0.4 percent advance as the yen weakened with gold. Crude in New York slipped from the lowest settlement in 12 years.

Volatility in Chinese markets spurred a global selloff in riskier assets as concern deepened over the ruling Communist Party’s ability to manage an economic slowdown. U.S. payroll growth surged in December, capping the second-best year for American workers since 1999. While that was further evidence of a resilient job market that prompted the Federal Reserve to raise interest rates, wages grew slower than forecast, adding to disinflation concerns stoked by plunging commodities prices.

“There will remain some jitters about China until they get through a week or more without having a precipitous drop,” said Peter Jankovskis, who helps oversee $1.9 billion as co- chief investment officer of Lisle, Illinois-based OakBrook Investments. “Given what’s going on in China right now, the market is looking for economic growth and evidence that there’s strength in the U.S. economy. We’re still walking on egg shells, but this is definitely going to help turn a corner.”


The Standard & Poor’s 500 Index rose 0.3 percent at 10:33 a.m. in New York. The index almost erased a gain of 0.8 percent before stabilizing. The gauge ended the first four days of 2016 lower by 4.9 percent, its worst start in data going back to 1928.

“The big concern right now is what’s happening overseas, particularly in China,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird, which oversees $110 billion. “Today there was a very strong labor market report that relieved some of that concern. Investors typically sell the first rally after a big selloff, because it’s the first chance they can get out on an uptick. That’s why the first rally after a deep decline is hard to get underway.”

The 292,000 gain in payrolls exceeded the highest forecast in a Bloomberg survey and followed a 252,000 increase in November that was stronger than previously estimated, a Labor Departmentreport showed Friday. The median forecast in a Bloomberg survey called for a 200,000 advance.

In Europe, the Stoxx Europe 600 Index fluctuated. The gauge is down about 4.5 percent in the week, the worst performance since August, when China’s shock devaluation of the yuan roiled global markets.

Emerging Markets

The People’s Bank of China set the yuan’s daily fixing at 6.5636 per dollar. That’s 0.5 percent higher than Thursday’s onshore effective closing price in the spot market and ends an eight-day reduction of 1.42 percent. The securities market regulator abandoned the circuit breaker after plunges of 7 percent in the CSI 300 triggered automatic trading halts on Monday and Thursday in its first week.

The PBOC “may have been surprised at how badly China and global stock markets reacted to yuan depreciation,” said Dennis Tan, a foreign-exchange strategist at Barclays Plc in Singapore. “They may want to keep the yuan stable for a while to help calm the stock market.”

The MSCI Emerging Markets Index advanced 0.3 percent, rebounding from a six-year low. Benchmarks in China, Brazil, South Korea, Thailand and Hungary gained at least 0.6 percent. Russian markets remained closed for holidays.

The CSI 300 Index of large-cap companies in Shanghai and Shenzhen advanced 2 percent and the Hang Seng China Enterprises Index climbed 1.1 percent from a four-year low. 

India’s rupee and South Africa’s rand led gains in emerging-market currencies, climbing at least 0.4 percent against the dollar. Brazil’s real strengthened 0.3 percent.


The yen weakened 0.8 percent and the Swiss franc slid 1 percent against the dollar. The euro fell 1 percent after German industrial production unexpectedly dropped in November. Output, adjusted for seasonal swings and inflation, slid 0.3 percent from October, when it gained a revised 0.5 percent, data from the Economy Ministry in Berlin showed.


U.S. Treasury 10-year notes fell for the first time in seven days, sending yields up two basis points to 2.17 percent. China may be selling Treasuries to raise money as part of its efforts to stabilize markets, said Yoshiyuki Suzuki, head of fixed income in Tokyo at Fukoku Mutual Life Insurance, which has $55.9 billion in assets. China’s foreign-exchange reserves shrank last year for the first time since 1992, according to central bank figures on Thursday.

Yields on euro-denominated junk-rated corporate debt rose to the highest since November 2012 on Thursday. The average yield climbed 12 basis points to 5.99 percent, according to a Bank of America Merrill Lynch index.


Oil fell 0.8 percent to $33 a barrel and contracts on Brent crude dropped 0.4 percent to $33.62 in London.

Gold pared its best weekly advance since August, falling 1 percent to $1,098.23 an ounce. The precious metal has outperformed other commodities this week as investors sought haven assets.

–With assistance from Neil Denslow, Emma O’Brien, Anna Kitanaka, Joseph Ciolli and Dani Burger.

See also:

BlackRock warns on bonds as Fed officials say economy is sound

Household wealth fell in third quarter, most in four years

Global stocks fall as Fed dents emerging markets; bonds decline


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