Stocks slide with emerging currencies as jobs cloud rate case

NEW YORK – Investors who woke up expecting clarity on interest rates or the strength of the U.S. economy got neither.

Stocks fell with emerging-market currencies and commodities after data showed the U.S. economy added fewer jobs than expected even as wages and hours worked rose. Anxiety remained elevated as U.S. investors head into a three-day weekend, with financial markets unable to shake off volatility that’s jolted markets amid concern China’s slowdown will spread.

“There’s a risk-off mentality rather than a risk-on one going into a three-day weekend for the U.S. and after the Chinese markets have been closed for four days,” Mark Spellman, a fund manager who helps oversee $4.2 billion at Alpine Funds in Purchase, N.Y,, said by phone. “The weakness in the market is due primarily to continued global growth concerns.”

Persistent hiring indicates employers were upbeat about America’s demand prospects amid mounting concerns of further deterioration in emerging economies. At the same time, the report failed to convince that the American economy can underpin global growth amid increasing signs China’s weakness is spreading.

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“This is the first time the market has looked at a Fed meeting and really has no idea what the Fed is going to do,” said Mark Kepner, an equity trader at Themis Trading LLC in Chatham, N.J. “Right now you’re looking at the overall uncertainty and that’s what’s hanging on the market. I don’t think this number in and of itself changes how somebody’s going to vote.”

Bonds

Treasury investors found reasons in the jobs report to pull forward expectations for a rate hike. The yield on two-year notes, which is most sensitive to Fed moves, advanced two basis points, while the 10-year yield slipped.

Investors raised bets on a September liftoff to 36 percent from 26 percent before the jobs data, though that’s still less than the 48 percent odds predicted before China devalued the yuan on Aug. 11. China’s surprise move roiled markets worldwide, sending global stocks to their biggest monthly loss in three years and commodities to a 16-year low.

Fed Bank of Richmond President Jeffrey Lacker said it’s time to end the era of record-low interest rates. Lacker, who’s historically been more inclined toward tighter policy than most of his colleagues, said Friday before the payrolls report that labor-market slack has been reduced to pre-recession levels.

Stocks

The Standard & Poor’s 500 Index fell 1.7 percent at 12:46 p.m. in New York, bringing its loss this week to 3 percent. The gauge was poised for its sixth decline exceeding 1 percent in 12 days. Prior to that there’d been 10 such declines since January. The benchmark has moved up or down by an average of more than 2 percent a day since falling out of its 2015 trading range on Aug. 20 — almost four times as much as in the prior nine months.

“It’s hard to get behind stocks with all this uncertainty,” said Lew Piantedosi, vice president of growth equities at Eaton Vance Management in Boston, where oversees $12.5 billion. “We’ve got a lot of cross-currents in the market with uncertainty with the Fed, the issue of China and the slowdown in emerging markets. Market volatility has spooked a lot of people and when the herd starts to move in a certain way they all follow in the same direction.”

The Stoxx Europe 600 Index dropped 2.5 percent for a third week of declines in the past four. The ECB downgraded its growth forecasts for the region on Thursday and signaled it may expand stimulus.

Adding to concern is Germany, where a report on Friday showed factory orders tumbled more than analysts anticipated. The country’s benchmark DAX Index declined 2.7 percent. Its 50- day moving average has fallen below its 200-day moving average, triggering a bearish technical signal called a “death cross.”

Emerging Markets

The MSCI Emerging Markets Index fell 1.7 percent, extending its weekly loss to 4 percent, as equity benchmarks in Brazil, Hong Kong, India, South Korea, Hungary and Taiwan dropped more than 1 percent.

A gauge of emerging-market currencies slumped to a record low as South Africa’s rand lost 1.9 percent and the Brazilian real tumbled 1.7 percent.

While mainland Chinese markets remained closed for two-day holiday, trading resumed in Hong Kong with the Hang Seng China Enterprises Index sinking to a two-year low amid speculation the government will pare back support for the market following this week’s military parade.

MSCI’s emerging-market index has fallen 11 percent since China devalued the yuan, with the average price-to-earnings ratio for the next 12 months at 10.4 times, a 31 percent discount to the MSCI World Index of developed countries.

Commodities

Oil fell amid signs a global crude surplus will persist. West Texas Intermediate for October delivery fell 48 cents, or 1 percent, to $46.27 a barrel in New York. Futures are up 2.3 percent this week. Brent for October settlement decreased 1.4 percent to $49.98 a barrel in London.

Gold futures slipped to the lowest in two weeks on bets the Fed will raise rates soon. The metal for December delivery fell 0.8 percent to $1,115.70 an ounce in New York, the lowest since Aug. 19.

Copper headed for the biggest loss in three weeks amid concerns that a slowing global economy will dent metals demand.

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