September 6, 2013 / 3:03 AM / 6 years ago

Bonds, stocks rally as U.S. jobs data weaker than expected

A visitor walks past logos at the Tokyo Stock Exchange in Tokyo June 13, 2013. REUTERS/Toru Hanai

LONDON (Reuters) - Government bonds and stocks clawed back ground and the dollar dipped on Friday, as key U.S. jobs data came in slightly weaker than expected and restored an element of caution into bets the Federal Reserve will start cutting its stimulus this month.

Nonfarm payrolls increased 169,000 last month versus expectations in a Reuters poll of 180,000, and while the wider unemployment rate fell to 7.3 percent it came as the share of Americans who either have a job or are looking for one dropped to its lowest level since 1978.

The miss saw U.S. 10-year government bond yields fall almost 10 basis points to 2.8821 percent by 1245 GMT, having jumped to a 2-1/2 year high of just over 3 percent on Thursday on bets the Fed will start scaling back its aid.

Wall Street futures and European stocks .FTEU3 rose, as did oil, while the dollar .DXY, which has been gaining in recent weeks as expectations of a cut in stimulus have firmed, dropped 0.5 percent.

“The revisions, more importantly than the actual number, were revised down pretty aggressively. I think people are questioning whether tapering occurs or doesn’t occur,” said Scott Graham, head Of U.S. government bond trading at BMO Capital Markets in Chicago.

“It’s probably gone from a foregone conclusion to slightly less of a foregone conclusion, but at the end of the day I still think they pull the trigger.”

Fed “tapering” as it is known has dominated attention for months and there is still a large amount of uncertainty about how the gradual removal of aid will affect the recovery of the world economy and its financial markets.

Gold, which has benefited strongly from the recent years of ultra cheap central bank liquidity, also jumped, climbing 2 percent immediately after the data to $1,392.46 an ounce.

“The big elephant in the room is what is going to happen next. Tapering itself is just slowing down QE and we have done that before but going beyond that is really unchartered territory,” added Rabobank economist Philip Marey.

Reporting by Marc Jones; Editing by Ruth Pitchford, Ron Askew

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