NEW YORK (Reuters) - Bond yields fell on Friday as solid U.S. jobs data reinforced the view that the Federal Reserve would raise interest rates gradually, while stock and currency markets were cautious ahead of an Italian constitutional reform vote on Sunday.
Crude futures rebounded on a weaker dollar, resuming a rise sparked by a cut in oil output agreed this week by the Organization of Petroleum Exporting Countries, the first since 2008.
The strength of the U.S. November payrolls report had been seen as critical for the Fed to lift rates again for the first time in nearly a year.
“Our view is that, aside from tax and death, a December hike is a certainty and it’s priced into the market at this point,” said Shannon Soccocia, head of asset allocation at Boston Private Wealth.
The U.S. unemployment rate slipped to 4.6 percent last month, its lowest in more than nine years, but wages unexpectedly fell 0.1 percent, dashing expectations of faster growth in household income that would fire up inflation.
After the wages data, longer-dated U.S. Treasury yields retreated further from the near 1-1/2-year peaks they had reached on Thursday. The benchmark 10-year Treasury note yield was down 4 basis points at 2.399 percent.
As bond markets took a breather from their massive selloff since Donald Trump’s U.S. presidential win, global equities were on the back foot as investors took profits on a run-up on bets that Trump would act on his campaign pledges of tax cuts and less regulation, which would spur faster economic growth.
The Dow Jones industrial average fell 21.51 points, or 0.11 percent, to 19,170.42, the S&P 500 rose 0.87 point, or 0.04 percent, to 2,191.95 and the Nasdaq Composite gained 4.55 points, or 0.09 percent, to 5,255.65.
For the week, the Dow edged up 0.1 percent, the S&P 500 fell 1 percent and the Nasdaq shed 2.65 percent.
The MSCI world equity index, which tracks shares in 45 nations, edged up 0.04 percent, to 412.61, marking a 0.6 percent weekly drop.
Anxiety over the possibility of Italians rejecting Prime Minister Matteo Renzi’s referendum, which could fuel political instability in euro zone’s third-biggest economy, has caused choppy trading across European markets.
Investors also await to see whether Norbert Hofer of the right-wing Freedom Party might win over former Greens Party leader Alexander Van der Bellen in the Austrian presidential election on Sunday.
Europe’s broad FTSEurofirst 300 index ended 0.3 percent lower at 1,339.18, bringing its weekly loss to 0.9 percent.
The euro was down as much as 0.3 percent at $1.0626 before recovering following the November U.S. jobs report. The euro zone common currency was little changed at $1.0660, ending with a 0.7 percent gain for the week.
Safe-haven demand ahead of the Italian and Austrian votes pushed the German 10-year Bund yield to 0.280 percent, down 8 basis points.
The dollar index posted its first weekly fall in a month. It was down 0.4 percent at 100.66.
A weaker greenback helped reversed the oil market’s initial losses, marking its best week in at least five years.
Brent crude settled up 52 cents or 0.96 percent at $54.46 a barrel. U.S. crude settled up 62 cents or 1.21 percent at $51.68.
Spot gold prices rose $4.86 or 0.42 percent, to $1,175.77 an ounce.
Additional reporting by Vikram Subhedar, Patrick Graham and John Geddie in London; Editing by James Dalgleish