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US: Stocks rise, bonds fall as tariffs, jobs data loom

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[NEW YORK] US stocks returned from a holiday break with a strong advance led by technology shares, even as markets prepared Friday's jobs report and the implementation of fresh tariffs between America and China. The dollar slumped.

All major equity benchmarks in the US advanced, with the Nasdaq indexes climbing more than 1 per cent on strength in chipmakers. European automakers drove the continent's stock markets higher on hopes of a trans-Atlantic tariff agreement. Asian shares earlier sank to a nine-month low as trade fears increased. Trading was quiet during the US holiday week, with turnover on the S&P 500 and Nasdaq 100 more than 20 per cent below normal.

Investors also assessed minutes from the most recent Federal Reserve meeting where officials affirmed the need for gradual interest rate hikes amid increasing trade risks. And while the jobs report Friday is expected to show continued strength in the American labor market, the midnight deadline for tariffs is fast approaching.

"The risks are increasing, it's becoming a bit of a bumpier ride, and I think there probably is some nervousness," said James McCann, global economist at Aberdeen Standard Investments. "Tightening policy alongside building risks is a more difficult cocktail for them."

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The dollar fell as jobless data disappointed, and Treasuries were stable. The yuan declined. Commodities slid and those with heavy exposure to international trade were particularly pressured, with iron ore futures in Singapore hitting a seven month low. Oil slumped as inventories unexpectedly rose.

"A pretty quiet day today as a lot of people are still on vacation," Matt Maley, an equity strategist at Miller Tabak & Co., wrote in an email to clients. "Those who are at their posts will be waiting to see tomorrow's employment report and the reaction to the tariffs that will go into effect tomorrow as well."

The trade conflict is poised to enter a new phase on Friday with the imposition of fresh tariffs between the world's two biggest economies. China said it won't be the first to act and will hold off on enforcement until the US does. Investors are also preparing for the release of Federal Reserve minutes later Thursday and American jobs data on Friday.

The euro strengthened and sovereign bonds fell as investors repriced the trajectory of European Central Bank rate increases and after data showed German factory orders surged in May. The pound climbed on hawkish comments from Bank of England Governor Mark Carney.

Elsewhere, emerging-market shares slipped for the eighth time in nine days, and developing-nation currencies held steady.

BLOOMBERG