Oil prices tumbled right after the U.S. non-farm payroll data today. As the U.S. jobs growth for May fell sharply well below market expectations, markets were concerned that the world’s top economy was headed for a long-term slowdown.
The US Dollar tumbled broadly against most majors, including the Euro, Yen, Sterling and reached an all-time low versus the Swiss franc.
Meanwhile, U.S. Treasury yields dropped substantially. Traditionally seen as the currency market’s safe haven, U.S. Treasuries prices shot up, consequently pushing yields down to six-month lows.
One of the key indices on Wall Street, the benchmark S&P 500 declined one percent to a six-week low in reaction to the US non-farm payroll report.
“This highly disappointing report is a real shocker,” said Mohamed El-Erian, co-chief investment officer at Pimco, the largest U.S. bond manager, in Newport Beach. California.
He added that “It confirms that America has an unemployment crisis that involves worrisome economic, political and social dimensions. It is hard to find any silver lining in today’s worrisome report. It speaks to a large unemployment problem that is becoming increasingly structural, and therefore protracted, in nature.”
Both crude oil and brent crude prices plummeted right after the news on heightened concerns that the reduction in jobs creation will create a domino effect in the already struggling U.S. economy. Fewer jobs means less consumer spending, leading to fewer factory orders and less manufacturing, consequently leading to a fall in demand for fuel.
Crude oil fell from $99.57 down over a dollar to $98.10 within thirty minutes of the news. Prices rebounded slightly on profit-taking.