Gold Supported by Softer Dollar After U.S. Jobs Data — Market Talk

0749 GMT - Gold prices rise more than 1% as the ​dollar weakened after U.S. private payrolls data pointed to slower job growth in August. Investors are now focused on interest-rate expectations, oil prices and bond yields worldwide. "While the market is pricing a more than 60% probability of a September rate hike, the question remains whether the Fed will tighten that close to the November midterm elections," analysts at Saxo Bank say. "For now, gold's inverse correlation with oil prices and bond yields remains a key focus, sidelining other potentially supportive drivers," they say. In early European trading, futures are up 1.3% at $4,472.20 a troy ounce. ([email protected])0720 GMT - Yields on U.K. government bonds, or gilts, decline, tracking their U.S. equivalents and helped by lower oil prices. This comes after developed-market sovereign bond yields climbed to multiyear highs in recent sessions, mainly driven by inflation concerns. Ten-year gilt yields hit a 19-year high of 5.294% on Wednesday, while 10-year Bund yields hit their highest since 2011, LSEG data show. Market focus is on U.S. non-farm payrolls data due to be released on Friday. Ten-year gilt yields fall 4.1 basis points to last trade at 5.198%. ([email protected])0720 GMT - Australia's 2Q GDP data this week highlighted the problem at the core of the economy. Productivity in remains alarmingly low, says Tapas Strickland, economist at Moomoo Australia. Labor productivity, measured as GDP per hour worked, was flat in the quarter, remaining at the same level it was in 2019. There has been no productivity growth for almost seven years, he adds. This is why anaemic economic growth is still leading to inflation, with markets pricing in a greater chance of a September RBA, Strickland says. ([email protected]; X @JamesGlynnWSJ)0711 GMT - Bitcoin rises modestly as investors look to diversify their investments amid high global market uncertainty. Investors await monthly U.S. jobs data due on Friday to gain clues on the possible path of U.S. Federal Reserve rate decisions. This follows weaker-than-expected U.S. ADP private payrolls data on Wednesday. Weaker data could push yields and the dollar lower, supporting bitcoin "if markets interpret the data as controlled cooling rather than a severe growth shock," says Mariia Menahem, CEO of Clarity Global, in a note. Bitcoin rises 0.5% to $77,784. ([email protected])0709 GMT - Japan's PM Sanae Takaichi is unlikely to change her loose fiscal policy stance unless the 10-year JGB yield rises rapidly above 3.5% and stays there, SMBC Nikko Securities economists say. Under her growth strategy centered on massive domestic investments, real GDP growth is projected to accelerate to 1.1% in FY 2030 and 1.8% in FY 2040, they say. That would help the national and local debt-to-GDP ratio decline steadily, they add. If the 10-year JGB yield remains around 3% and the investment program is successful, the government can hit its debt-reduction targets, making policy changes unlikely at this level, the economists note. The 10-year JGB yield was last at 2.965%.([email protected])0659 GMT - Eurozone government bond yields fall in opening trade, taking a breather after hitting successive multiyear highs in previous sessions. Lower oil prices help push yields lower, as well as comments by New York Federal Reserve President John Williams who indicated in an interview with CNBC that he doesn't see clear-cut evidence right now that the Fed must raise interest rates to respond to persistent inflation. Bond supply will be significant on Thursday, coming from Spain, France and Ireland. The 10-year German Bund yield, which rose to a 15-year high of 3.395% on Wednesday, falls 1.4 basis points to 3.364%, according to Tradeweb. ([email protected])0627 GMT - The U.S. dollar declines alongside a fall in Treasury yields, driven by lower oil prices and no urgency by the Federal Reserve to raise interest rates. New York Fed President John Williams signaled in an interview with CNBC on Wednesday that he doesn't see any urgency to raise interest rates to respond to persistent inflation. Adding to that, U.S. ADP private payrolls figures were weak. U.S. money markets now price a 59% probability of a rate hike this month, down from nearly 70% on Wednesday, LSEG data showed. The DXY index, which measures the dollar against a basket of currencies, falls 0.2% to a 6-day low of 99.349, having hit a near three-week high of 99.863 on Wednesday. ([email protected])0557 GMT - Danske Bank maintains its buy recommendation on Irish government bonds versus core EU, despite the less-liquid market and already significant tightening to peers in terms of ASW spreads, chief analyst Jens Peter Sorensen and analyst August Hyldgaard say in a note. They point to Ireland's "solid macroeconomic fundamentals, a pick-up to Aaa-rated peers and the outlook for a rating upgrade." They reckon that investors should use Thursday's auction to buy Irish government bonds relative to, for example, Germany. Ireland's National Treasury Management Agency will auction 1 billion euros to 1.25 billion euros in October 2032- and May 2035-dated bonds. ([email protected])0551 GMT - U.S. Treasury yields fall in Asian trade as oil prices retreat, albeit remain at elevated levels. New York Fed President John Williams signaled in an interview with CNBC on Wednesday that he doesn't see any urgency to raise interest rates to respond to persistent inflation. The two-year Treasury yield declines 2.3 basis points to 4.362%, while the 10-year yield is down 2.8 basis points at 4.765%, according to Tradeweb data. The 10-year Treasury yield hit 4.818% on Wednesday, its highest in nearly three years. ([email protected])0529 GMT - Elevated bond yields are unlikely to tank stocks, Tengler Investments' Nancy Tengler says in a note. "As we have pointed out for years, the 1990s was a period of elevated yields [the 10-year traded between 5%-8% during the decade] which coexisted with robust stock price performance," the CEO and CIO says. Referring to a Goldman Sachs study of how bond yield levels affect stock returns, she says that Goldman confirms this by pointing out that stocks performed well when the 10-year Treasury yielded less than 3% and over 6%. "Two factors matter: how quickly yields have changed and why?," Tengler says. Finally, with earnings growth roaring forward at the 20+% rate, it is unlikely investors are going to pull money from stocks to invest in bonds, even if yields move up 10% from here, she says. ([email protected])0513 GMT - The Federal Reserve is expected to remain on hold this year in Russell Investments' baseline scenario, senior investment strategist BeiChen Lin says in a note. "But if job creation were to come in significantly hotter than consensus expectations (e.g. more than double), that might cause the Fed to give more consideration to rate hikes if inflation does not cooperate," he says ahead of Friday's payrolls data. "When we triangulate across all the labor market data that will be released this week, we're expecting that the labor market will be room temperature, rather than boiling or frozen. And that would be good news for the Fed," he says. Russell Investments sees good value in U.S. Treasurys across the curve. ([email protected])0513 GMT - The yen keeps gaining strength after in the Asia session after a surge during U.S. hours spurring speculation about potential market intervention. Maybank analysts note that the market's inherent short positioning can trigger significant appreciation on positive developments. The ones that seem to have given the currency support include comments from hawkish BOJ board member Takata on the pace of rate hikes and talk that Japan's GPIF could be reconsidering asset allocation. However, the idea of a jumbo-sized BOJ hike is speculative and Maybank notes that while changes to the GPIF's portfolio could lead to a substantial repatriation of funds to Japan, the process would take time. Maybank sees two-sided risks for dollar-yen pair, and stays wary of sharp moves. ([email protected])