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Oil, treasury yields decline as US sees falling job openings

June 5, 2024

Key points:

  • U.S. job openings fell to a three-year low, signaling potential economic slowdown.
  • Treasury yields declined, while the dollar and safe-haven assets saw gains.

The U.S. economy’s recently robust performance may be starting to wane, as indicated by the latest Job Openings and Labor Turnover Survey (JOLTS). The data revealed that job openings fell to the lowest level in more than three years in April, indicating a softening in the labor market.

This unexpected drop in job openings is causing ripples across various markets – reasonably prompting a reassessment of economic expectations.

Markets react to JOLTS report

For one, the decline in job openings has fueled speculation that the Federal Reserve might lower interest rates sooner than anticipated. This sentiment was reflected in the movement of Treasury yields, which initially fell before stabilising. The benchmark 10-year note yield dropped by 7 basis points to 4.332%, reaching as low as 4.314%, its lowest since mid-May. Similarly, the two-year note yield fell by 5 basis points to 4.773%.

Global stocks and commodities experienced a downturn as traders grew uneasy about the potential weakening of the U.S. economy. The MSCI All-World index dipped by 0.2%, while major U.S. stock indices saw modest gains by the end of the trading session. The S&P 500 and Nasdaq Composite both rose by 0.2%, and the Dow Jones Industrial Average increased by 0.4%.

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Volatility indices, such as Wall Street’s VIX and the Euro STOXX volatility index, saw significant movement, reflecting heightened nervousness among traders. Safe-haven assets like bonds and the dollar remained in positive territory, as traders sought stability amid the uncertainty.

Domino effect

So far, the stronger U.S. dollar has exerted downward pressure on commodities. Oil prices declined, with U.S. crude falling by 1.2% to $73.33 per barrel and Brent crude dropping by 1% to $77.56 per barrel.

Gold prices also fell by 1% to $2,329.46 an ounce, while copper prices, which had hit record highs last month, rose by 1.5% to $10,193 per tonne.

XAUUSD chart showing a downward trend in gold prices at VT Markets, reflecting a 1% fall to $2,329.46 an ounce amid stronger U.S. dollar and declining job openings. The image highlights the impact on commodities with oil and treasury yields also declining.

SEE: Gold weakens, pressured by stronger US dollar on the VT Markets app.

In Europe, the STOXX 600 index fell by 0.5%, led by declines in energy, mining, and banking stocks. Meanwhile, political developments in India and other emerging markets has added to the market volatility.

In India, share markets sold off sharply as early vote counting suggested that Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP)-led alliance might not achieve the landslide victory anticipated. This uncertainty caused the Nifty index to drop by as much as 8.6%, while the BSE index fell nearly 6%.

In Mexico and South Africa, political jitters also affected the peso and the rand, both of which fell by about 1.1%.

This week, attention turns to the upcoming non-farm payroll figures for May, set to be released on Friday. The data will provide further insight into the labor market’s health and the broader economic outlook.

The recent manufacturing activity data, which showed a decline for the second consecutive month, has already influenced Treasury yields and market sentiment.

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