NEW YORK, July 8 — MSCI’s global equity index ended yesterday’s session virtually unchanged while the dollar was lower as government data showed that US jobs growth slowed more than expected in June, easing worries about the outlook for Federal Reserve rate hikes.

But while investors appeared to hold out hope for a less hawkish Fed, they were also looking cautiously to the week ahead, with key US inflation readings due along with the start of the second-quarter earnings season.

Official US nonfarm payrolls yesterday showed employers added 209,000 new hires in June, below forecasts, while May numbers were revised down by 33,000 to 306,000. Still, the unemployment rate fell to 3.6 per cent in June from 3.7 per cent in May and average hourly earnings rose 0.4 per cent, the same as May.

On Thursday, private payroll provider ADP’s strong US labour market data had sparked an equities sell-off and boosted Treasury yields.

While yesterday's government data was initially met with a more muted market reaction, stocks gained some ground during the session before losing ground again in afternoon trading.

“Investors are more cautious going into a very important week with the beginning of earnings season and a very important inflation reading mid week,” said Quincy Krosby, chief global strategist, LPL Financial in Charlotte, North Carolina.

Earlier in the session traders appeared relieved that payrolls came in “much lower than feared, based on the ADP report,” said Sam Stovall, chief investment strategist at CFRA Research, adding that investors may have concluded that they “over-reacted” on Thursday.

“Investors still have a bullish mindset and are using near-term weakness as a buying opportunity,” Stovall added.

However, the Dow Jones Industrial Average fell 187.38 points, or 0.55 per cent, to 33,734.88, the S&P 500 lost 12.64 points, or 0.29 per cent, to end at 4,398.95 and the Nasdaq Composite dropped 18.33 points, or 0.13 per cent, to close at 13,660.72.

MSCI’s gauge of stocks across the globe shed 0.05 per cent after rising as much as 0.6 per cent earlier yesterday. Emerging market stocks lost 0.41 per cent.

While traders still were still betting on a more than 90 per cent chance that the Fed would raise rates by a quarter of a percentage point in late July, expectations for another hike in September fell slightly, according to CME Group’s FedWatch tool.

The dollar slumped after the labour market data as some traders were betting that the Fed could cut rates sooner than previously expected. Also the yen jumped sharply against the dollar.

The dollar index fell 0.795 per cent, with the euro up 0.73 per cent to US$1.0965.

The Japanese yen strengthened 1.40 per cent versus the greenback at 142.10 per dollar, while Sterling was last trading at US$1.2835, up 0.75 per cent on the day.

Some US Treasury yields dialled down yesterday, although longer-dated yields were higher, after the jobs data calmed worries the Fed could become more aggressive with rate hikes.

Benchmark 10-year notes were up 2.3 basis points to 4.064 per cent, from 4.041 per cent late on Thursday. The 30-year bond US30YT=RR was last up 4.6 basis points to yield 4.0491 per cent, from 4.003 per cent. But the 2-year note was last was down 6 basis points to yield 4.9459 per cent, from 5.006 per cent.

In commodities, oil prices rose to 6-week highs as supply concerns outweighed fears about that more rate hikes could slow economic growth and reduce demand for oil.

US crude settled up 2.87 per cent to US$73.86 per barrel and Brent finished at US$78.47, up 2.55 per cent on the day.

Spot gold added 0.7 per cent to US$1,924.13 an ounce. US gold futures gained 0.89 per cent to US$1,925.60 an ounce. — Reuters