Equities rise with dollar, strong US payrolls dampen rate cut hopes
US added 254,000 jobs in September vs 140,000 estimates
Dollar hits highest level since August
US 10-year yield rises, oil climbs on Mid East fears
Updated prices at 2:43 p.m ET/ 1843 GMT
By Sinéad Carew and Amanda Cooper
NEW YORK/LONDON, Oct 4 (Reuters) -MSCI's global equities index rose on Friday while the dollar climbed to its highest level since mid-August as investors heaved a sigh of relief on news of a surprisingly strong U.S. labor market.
However, oil prices settled higher for a fourth consecutive session as investors braced for a potential Israeli strike on Iranian energy infrastructure.
Earlier on Friday, the U.S. Bureau of Labor Statistics said 254,000 workers were added to nonfarm payrolls last month, above the 140,000 economists hadestimated, while August's data was revised higher and the 4.1% unemployment rate was lower than expected.
U.S. Treasury yields rose to their highest level since early August and traders ditched bets that the Federal Reserve will cut rates by half a percentage point next month after the jobs report.
The Fed is now more likely to lower rates by only a quarter percentage point at its next meeting, said Julia Hermann, global market strategist at New York Life Investments.
"U.S. equities reaction to this very strong jobs growth confirms that investors are most concerned about economic growth" even when it comes with a "hawkish disruption," she said.
"The fact the market has been able to digest this hawkish shift points to a constructive view about the economic outlook," Hermann added, pointing to moves in U.S. Treasuries as well as stocks.
Likely bringing further relief for U.S. economy was the reopening on Friday of U.S. East Coast and Gulf Coast ports after dockworkers and port operators reached a wage deal to settle the industry's biggest work stoppage in nearly half a century. However, clearing cargo backlog is expected to take time.
On Wall Street at 2:43 p.m. ET, the Dow Jones Industrial Average .DJI rose 187.55 points, or 0.45%, to 42,199.14, the S&P 500 .SPX climbed 29.91 points, or 0.52%, to 5,729.85 and the Nasdaq Composite .IXIC advanced146.19 points, or 0.82%, to 18,064.67.
MSCI's gauge of stocks across the globe .MIWD00000PUS rose 2.63 points, or 0.31%, to 844.93. Earlier, Europe's STOXX 600 .STOXX index rose 0.44%.
Investors remainedanxious about how Israel would respond after Iran fired missiles at it on Tuesday. Supreme Leader Ayatollah Ali Khamenei said earlier that Iran and its regional allies will not back down.
But oil prices had pared gains after U.S. President Joe Biden said that, in Israel's shoes, he would consider alternatives to striking Iranian oil fields and that he thinks Israel has not decided yet how to respond.
U.S. crude CLc1 settled up 0.9% at $74.38 a barrel and Brent LCOc1 settled at $78.05 per barrel, up 0.55% on the day.
In currencies, the dollar jumpedto a seven-week high on Friday and was eying its biggest weekly gain since September 2022 after the jobs report led traders to cut their bets on a big Fed rate cut.
And based on its gains for the full week, New York Life's Hermann said the dollar was also "clearly reacting to geopolitical risk."
The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.62% to 102.54.
The euro EUR= was down 0.57% at $1.0968. Against the Japanese yen JPY=, the dollar strengthened 1.27% to 148.79.
In Treasuries, the yield on benchmark U.S. 10-year notes US10YT=RR rose 12.1 basis points to 3.971%, from 3.85% late on Thursday while the 30-year bond US30YT=RR yield rose 7.9 basis points to 4.259%.
The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations, rose 20.4 basis points to 3.9176%, from 3.714%.
A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=RR, seen as an indicator of economic expectations, was at a positive 5.1 basis points.
In precious metals, spot gold XAU= fell 0.33% to $2,647.12 an ounce. U.S. gold futures GCc1 fell 0.38% to $2,647.10 an ounce.
Oil price wary amid prospects of war escalation https://reut.rs/3zM4k0O
Monthly change in US jobs https://reut.rs/47QAQeR
Reporting by Sinéad Carew in New York, Amanda Cooper in London, Rae Wee in Singapore and Davide Barbuscia in New York; Editing by Jacqueline Wong, Andrew Heavens, Chizu Nomiyama, Toby Chopra and Richard Chang
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