Mounting concern about the inflationary impact of falling US unemployment has sent tremors through global financial markets amid fears that the long post-financial crisis rally in asset prices is nearing its end.
The effective interest rate on 10-year benchmark US bonds reached their highest level for seven years after the latest snapshot of the American labour market showed fewer workers claiming jobless benefits.
Shares on Wall Street fell sharply as investors predicted that the monthly official payroll report out on Friday would show that the drop in unemployment was leading to pressure for higher wages.
The Dow Jones Industrial Average dropped for the first time in six days and, along with the more broadly-based S&P 500, was on pace for its biggest one-day drop since late June. The technology-heavy Nasdaq fell nearly 2%. They managed to rally slightly before the closing bell but all eyes will be on Friday’s job report. And good news for employees may be bad news for investors.
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