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Investing Specialists

The Goldilocks Employment Report

April's job gains were strong enough to keep a rate increase on the table for September but weak enough that a June increase looks highly unlikely.

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Equity markets performed much less in step this week as Europe was up 1.2%, the United States just 0.11%, and emerging markets were down 1.2%.

Generally, forecasts and news out of Europe seemed to indicate at least some improvement, while U.S. growth seemingly slowed a little more, and economic data out of China and fears of a slowing in the United States held back emerging markets. Relative strength in Europe and a new belief that additional QE might not be necessary pushed European interest rates sharply higher. This had a knock-on effect on U.S. rates, which have generally moved higher--the U.S. 10-Year bond yield now stands at 2.12%. Morningstar bond strategist David Sekera has been saying for some time that recent negative interest rates in Europe didn't make any sense on a fundamental basis as traders bought bonds at negative yields in hope of selling them to other traders at even lower rates. It took just a whiff of growth to almost instantaneously pop interest rates in Europe.

Robert Johnson, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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