LONDON - Surprisingly weak U.S. jobs data soured sentiment for risky assets on Friday and oil prices retreated from the one-month highs hit earlier in the day as risk of escalating U.S. military action in Syria ebbed.
U.S. employers added the fewest number of workers in 10 months in March, but a drop in the unemployment rate to a near 10-year low of 4.5 percent pointed to a labor market that continues to tighten.
Stocks and the dollar, which were trading flat before the data, slipped. S&P 500 futures fell about 0.3 percent while the dollar weakened against the yen and the euro.
The probability of the U.S. Federal Reserve hiking rates in its June meeting, which was as high as 70 percent overnight, fell to 57.7 percent, according to Thomson Reuters data.
“It’s a little less than expected. This is an economy that’s getting better but it’s not getting better quickly,” said Peter Costa, president of Empire Executions Inc in New York.
“I think the Fed has wanted to see wage growth a little better, and they’re not getting it,” said Costa, who added he expected markets to react negatively to the data.
Earlier in the session, a U.S. missile strike on Syria hit risky assets though prices recovered after a U.S. defense official told Reuters the missile strike was a “one-off,” helping to calm market nerves.
Oil prices which surged more than 2 percent in Asian hours gave up almost all of their earlier gains.
Brent crude futures were last up 0.3 percent at $51.72 a barrel. U.S. West Texas Intermediate (WTI) crude futures were flat.
“The U.S. missile strike on a Syrian air base overnight caused a knee-jerk shift into safe havens, although the impact was moderate as it is being interpreted as a one-off proportionate response,” said Ian Williams, a strategist at Peel Hunt in London.
Demand for safe-haven assets such as gold remained intact.
Investors had already been on edge with talks poised to begin between Donald Trump and Chinese leader Xi Jinping over flashpoints such as North Korea and China’s huge trade surplus with the United States.
Investment flows underscored the broadly “risk-off” tone in markets in recent sessions.
The latest data from Bank of America Merrill Lynch and fund tracking firm EPFR showed investors pumped $12.4 billion into bond funds over the past week while pulling $7.4 billion from the equities, the largest outflow in 40 weeks.
Spot gold was up a percent while high-rated euro zone government bonds edged lower.
The yield on Germany’s 10-year government bonds fell to a one-month low. Overnight, U.S. Treasury yields dropped to their lowest level in over four months.
“Safe-haven flows are always affected by political events, and when it affects countries where the U.S. and Russia are interested, then investors become even more nervous because of relations (between those two),” said DZ Bank strategist Daniel Lenz.
“Especially now you also have talks between the U.S. and China on North Korea,” he added.