U.S. equities advanced in the final minutes of trading and Treasury yields surged Friday as a solid U.S. jobs report buttressed the Federal Reserve’s case to use aggressive interest-rate hikes to tackle inflation.

The S&P 500 ended higher after earlier fluctuations while the U.S. yield curve extended its recent flattening as investors evaluated the economic outlook amid tightening monetary policy and Russia’s war in Ukraine. The dollar gained as U.S. payrolls slightly missed expectations and the March unemployment rate fell to 3.6 per cent. Meanwhile, an ISM manufacturing survey disappointed, with higher-than-expected prices paid. 

“Although today’s job report was a little softer than expected, it still paints a picture of a steaming labor market,” said Seema Shah, chief strategist at Principal Global Investors. “The final vestiges of COVID-19 are close to being fully eradicated from U.S. economic data – the unemployment rate is just a touch above the pre-pandemic level and the number of people on temporary layoff is back to where it was before March 2020.”

Investors begin a new quarter wondering if the fighting in Ukraine, the isolation of Russia and the Fed’s increasingly hawkish turn will engender still more volatility and losses for stocks and bonds. Raw materials are the only key asset class to deliver major gains so far in 2022 as global stocks finished the quarter with their first loss since the pandemic bear market.

“It is officially the first week pointing consistently towards a slower economic activity worldwide,” said Florian Ielpo, head of macro at Lombard Odier Asset Management. Ielpo says positioning signals are on the bearish side and an internal model of his is showing a consumption slowdown could hurt earnings across the second quarter.

Declines in oil prices moderated Friday as the U.K. is expected to join the U.S. in releasing more oil from its reserves as part of an effort to lower prices and reduce reliance on Russian supplies. Russia’s Gazprom PJSC has started telling clients how to pay for gas in rubles. Meanwhile, European Union leaders said they told China they expect the country to help persuade Russia to end the war. 

Russian stocks gained for a third day, the longest winning streak since trading resumed on March 24, as talks between Ukraine and Russia resumed. Russian Foreign Minister Sergei Lavrov said Moscow is preparing a response to Ukraine’s proposals on ending hostilities.  

So far the Russian government has stayed current on its debt obligations. JPMorgan Chase & Co. processed a nearly US$447 million payment for dollar debt due in 2030 on Thursday. Another deadline is approaching on April 4.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.3 per cent as of 4:02 p.m. New York time
• The Nasdaq 100 rose 0.2 per cent
• The Dow Jones Industrial Average rose 0.4 per cent
• The MSCI World index rose 0.2 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.2 per cent
• The euro fell 0.2 per cent to US$1.1049
• The British pound fell 0.2 per cent to US$1.3114
• The Japanese yen fell 0.7 per cent to 122.51 per dollar

Bonds

• The yield on 10-year Treasuries advanced four basis points to 2.38 per cent
• Germany’s 10-year yield was little changed at 0.55 per cent
• Britain’s 10-year yield was little changed at 1.61 per cent

Commodities

• West Texas Intermediate crude fell 0.7 per cent to US$99.55 a barrel
• Gold futures fell 1.4 per cent to US$1,927.20 an ounce