US stock markets ended the week last night with the biggest single-day loss of the Trump era, as investors adjusted their interest rate expectations following labour market data which showed signs of an increase in inflation.
The benchmark S&P 500 lost 2.12 per cent over the day, while the Dow Jones Industrial Average shed 2.54 per cent.
The plunge in stocks came after US payrolls data showed a jump in wage inflation. Average hourly earnings rose by 2.9 per cent in the year to January, the fastest pace since June 2009, according to the US Bureau of Labor Statistics.
Read more: The dollar is climbing fast after US jobs beat expectations last month
The Federal Reserve has already warned it is on the lookout for a sustained pick-up in inflationary pressures. On Wednesday the US central bank said inflation was likely the rise over the course of the year.
The signs of inflation also prompted a sell-off in bond markets, with benchmark US government yields rising to their highest since 2024. The yield on the US 10-year Treasury hit a high of 2.8525 per cent yesterday.
Ken Odeluga, an analyst at City Index, said the Federal Reserve's plans to raise rates three times this year may be "vindicated by green shoots in personal income growth". If the economy continues to accelerate amid a stronger global environment, "pay growth that’s finally catching up could force the Fed to hike faster than it foresees," he said.
Read more: FTSE 100 follows global stock market sell-off as bond yields jump
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