LONDON: Data showing strong job creation and wage gains in the United States fed expectations of interest rate hikes, sending the dollar and US bond yields higher on Friday, while stocks slumped lower.
With 200,000 jobs added to the US economy last month, more than analysts had forecast, expectations will mount that the Federal Reserve will push forward with more intest rate hikes.
The Fed's concerns about tepid inflation will likely be salved by data showing wage growth of 2.9 percent, the largest 12-month increase in more than nine years.
The dollar snapped higher after the announcement, as did the yield on US government bonds. Bloomberg reported the rate of return on 10-year US Treasury hit a four-year high of 2.84 percent.
"Repeated signs that wage growth is building momentum are likely to support rising inflation expectations, which could boost speculation of higher US interest rates this year," said research analyst Lukman Otunuga at FXTM online currency brokerage.
- Jobs crutch for dollar -
"The dollar clearly needed support this week, and January's impressive US jobs data has come to the rescue," he added.
But analyst Craig Erlam downplayed the size of the gains by the dollar gains.
"Not an overly large move in USD when you consider size of beat on earnings and a small beat on NFP. Sign of USD unpopularity right now?" he tweeted.
The dollar has been struggling against its major peers recently.
With dealers betting on tighter monetary policy at the European Central Bank and preferable terms for Britain when it leaves the European Union, the euro and pound have been making gains against the dollar the past couple of weeks.
The dollar has also been weighed down by political worries, including over a US government shutdown and earlier today by reports that the new head of the FBI could resign if Trump approves the release of an explosive secret memo at the centre of a political firestorm in Washington.
Meanwhile, US stocks opened lower, as higher interest rates are not usually good for consumers and companies. The Dow dropped 0.6 percent in the first minute of trading.
With the Federal Reserve already in the midst of a rate-raising cycle -- it is now tipped to hike at least three times this year -- there is increasing concern about the impact on growth and world markets.
Eurozone stock markets also slumped on Friday, with the Frankfurt and Paris stock markets were down more than one percent on Thursday's closing levels.
Outside the eurozone, London's losses were less acute at 0.2 percent.
"The global equity selloff has gathered pace, with European markets taking the brunt of the selling," said Chris Beauchamp, chief market analyst at IG trading group.
The German market was hit also by news that the nation's biggest lender, Deutsche Bank, was pushed into the red last year by US President Donald Trump's tax reforms.
Deutsche Bank's share price was down nearly 4 percent in afternoon trading.
- Bitcoin heads down -
Asian markets swung Friday with some recovering from early losses but traders remain on edge as over the rise in US Treasury yields.
Bitcoin fell below $8,000 for the first time since November after India said it did not consider cryptocurrencies legal tender and will look to eliminate their use as payment systems.
The remarks come after regulators in South Korea, China and Russia recently said they would clamp down on virtual currencies.
Bitcoin's level compares with its record high around $19,500 seen in mid-December at the height of a crypto-boom. Some analysts warn it could fall to $6,000.
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