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Markets hit by weak US jobs data and Syria strikes

Friday 14:30 BST

What you need to know
● Markets rattled by poor US jobs data missile strike on Syria
● Brent crude spikes to 4-week high above $56 a barrel, relapses
● Gold and Treasury prices rise as traders seek havens
● S&P 500 futures choppy and European bourses mixed
● Dollar index volatile, climbs 0.2 per cent to 100.88 after jobs data
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Hot topic

Global markets are suffering a double blow as geopolitical angst is joined by worries over the health of the world’s biggest economy.

Oil prices and haven assets including gold, the Japanese yen and government bonds jumped in early Asia trading, while equity gauges stumbled, after the US launched a military strike against Syria in response to a gas attack there that killed more than 70 people.

Investor sentiment turned decidedly bearish as news broke that two US navy ships in the Mediterranean had fired more than 50 Tomahawk missiles at a target inside the war-ravaged Middle East nation.

Rex Tillerson, US secretary of state, said the Trump administration no longer believed Bashar al-Assad could remain Syria’s leader and that there was “no doubt” the Syrian regime was behind this week’s poison gas attack.

The missile strike and Mr Tillerson’s comments heightened tensions with Moscow and came as investors were already displaying geopolitical nerves over the two-day summit taking place in Florida between Chinese President Xi Jinping and his US counterpart.

News of the attack rattled markets, with investors swiftly switching to defensive mode, pushing up the price of gold, boosting the Japanese yen and forcing down bond yields.

Some of the sharpest moves had been pared by the time US traders took to their desks. S&P 500 futures, for example, had been down 0.7 per cent only to recover all their losses by mid session.

But then sentiment took another hit when data showed the US economy created only 98,000 jobs in March, well below forecasts for a 180,000 increase.

There was some good news in that the unemployment rate fell from 4.7 per cent to 4.5 per cent, the lowest in nearly 10 years, but the disappointing headline figure has investors questioning the narrative of a Trump-linked economic bounce and thus the projected pace of Federal Reserve interest rate rises.

Still, as traders absorb the Syria and jobs news the market is delivering a muddled response.

Gold is maintaining its haven status and welcoming the prospect of the Fed increasing borrowing costs at a slower rate, the bullion jumping 1.2 per cent to $1,266 an ounce, hitting a five-month high after breaking above its 200-day moving average.

Yet the dollar index, after initially weakening in response to the jobs numbers, is up 0.2 per cent to 100.88 as currency traders reason that the low US unemployment rate will soon lift annual wage growth above its current 2.7 per cent, putting pressure on the Fed to tighten policy.

US Treasury yields, which move opposite to bond prices, are off the session lows that came in the wake of the jobs data, but are still down for the day as concerns linger about the Syria strikes. The 10-year note is slipping four basis points to a four-month low of 2.31 per cent, while equivalent maturity German Bund yields are off 4bp to 0.23 per cent.

Commodities

Oil prices traded at their highest in a month as investors fretted about the possible disruption of middle-east supplies.

Brent crude, the international energy benchmark at one point on Friday rose above $56, its most expensive since March 7.

But sellers emerged and Brent is currently off 0.1 per cent to $54.82, while West Texas Intermediate, the main US contract that earlier touched nearly $53, is advancing just 0.2 per cent to $51.80.

Separately, the price of coking coal is surging more than 30 per cent after a tropical cyclone hit a key supply route in Australia.

Equities

Action across stock markets has been noticeably more nuanced throughout the session, tracking the vacillations of US equity futures.

At the opening bell on Wall Street the S&P 500 is down just 0.1 per cent to 2,355 as investors prepare for the first-quarter corporate earnings season just around the corner.

The rally in S&P futures has helped the pan-European Stoxx 600 to pare its losses, leaving it down less than 0.2 per cent even as a slide in copper prices puts London-listed miners under pressure.

Earlier in Asia, Japan’s benchmark Topix rose 0.65 per cent, recovering from a dip into negative territory as the stronger yen hurt exporters.

Australia’s S&P/ASX 200 added 0.1 per cent, paring an initial gain of as much as 0.6 per cent, while Hong Kong’s Hang Seng fell less than 0.1 per cent.

China’s Shanghai Composite inched up 0.2 per cent to a new four-month high as some profit-taking in construction shares was outweighed by gains for defence and energy groups, according to Reuters.

Forex

A choppy session for the “haven” yen illustrates the market’s shifting moods. The Japanese currency strengthened to ¥110.14 a dollar after news of the Syria strikes hit the wires, but it is now 0.1 per cent weaker at ¥110.91 as the buck sees broad strength.

The Turkish lira is feeling the pressure of the conflict across its border, weakening by 0.5 per cent to 3.7284 per dollar.

The Russian rouble, which would normally strengthen along with oil prices, is down 1.3 per cent to 57.1025 per dollar as traders hopes for improved Washington/Moscow relations are hit.

“The direction of the response to the [Syria] news has clearly favoured safe-haven currencies with JPY [Japanese yen] a beneficiary and risk currencies such as AUD [Australian dollar] trading lower,” Todd Elmer, CitiFX strategist said earlier in the day.

“However, the moves have been relatively measured. This may reflect that positioning is relatively light with investors having pared back exposure in response to the more muddled backdrop on both politics and monetary policy in recent weeks.”

The euro is off 0.2 per cent to $1.0619 even after data showed German industrial production expanded 2.2 per cent in February.

Sterling is down 0.6 per cent to $1.2393 after a report showed that UK industrial production unexpectedly contracted in February, falling 0.7 per cent month-on-month.

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