Global stocks and bond prices fell after a key US jobs report painted a mixed picture of the US labour market and left investors with a muddled view on rate hike prospects.
The dollar rose, rebounding after two days of losses that forced the unwinding of large bets in favor of the greenback against other currencies worldwide.
Oil prices dipped and were set to end the week lower after two weeks of gains.
While US non-farm payrolls increased by just 151,000 jobs last month, well below forecasts of 190,000, the unemployment rate fell to 4.9 per cent, the lowest since February 2008, and a sharp rise in wages suggested the labour market recovery remained on track.
Despite the weak headline figure, the rest of the report was taken hawkishly by markets. Fed funds futures contracts showed traders boosted chances of a Fed rate hike in December to about 40 per cent.
Before the report, they expected the Fed to wait until well into next year before raising rates.
Wall Street was lower, led by weakness in technology shares after poor results from data company Tableau Software and networking platform LinkedIn.
The S&P 500 information technology sector fell 2.7 per cent.
The Dow Jones industrial average fell 195.04 points, or 1.19 per cent, to 16,221.54, the S&P 500 lost 30.29 points, or 1.58 per cent, to 1,885.16 and the Nasdaq Composite dropped 119.48 points, or 2.65 per cent, to 4,390.08.
After a weak service-sector business sentiment report on Wednesday and dovish comments from New York Federal Reserve chief William Dudley, US money markets shifted to forecast no move in official interest rates this year.
The Federal Reserve’s own forecasts, meanwhile, still suggest four increases by year-end, a pace many consider unlikely, which is likely to be addressed by Fed Chair Janet Yellen next week when she appears before Congress for semi-annual monetary policy testimony.
The dollar index rose 0.6 per cent to 97.05, having endured a pretty rough week.
The dollar has shed 2.7 per cent this week as expectations that the Fed would raise rates at least once this year evaporated on signs of domestic weakness and broader concerns over global growth.
The dollar’s decline was spurred by traders unwinding complicated cross-market bets that involved borrowing in euro and yen and buying US assets.
US bond yields rose after the jobs report, with the 10-year yield rising to 1.87 per cent, though shorter-dated Treasuries had a more dramatic move, causing the yield curve to flatten, a signal of concern about economic slowdown.
Crude oil was lower. Brent crude was down 0.3 per cent at $34.38 a barrel, while US crude fell 0.6 per cent to $31.58 a barrel.