Roundup: Hopes dim for U.S. rate hike following weak jobs data

The odds for an interest rate hike by the U.S. Federal Reserve next month diminished after disappointing U.S. jobs data battered the stock market and the U.S. dollar on Friday.

The Labor Department report showed that the United States added 38,000 jobs in May, the lowest monthly gains in almost six years and far below the average market expectation of around 160,000.

The job increases in March and April were also revised downward, with the combined job gains in these two months at 59,000, less than previously reported.

Analysts described the jobs data as "a bombshell" that significantly reduced the odds of an interest rate hike by the Fed in July.

"There was almost nothing good in the U.S. jobs report for May -- and remember the jobs report for April was not strong either," the research team of Danske Bank said. "We think a summer hike is now very unlikely."

The Fed is expected to have a regular monetary policy meeting from June 14 to June 15 to decide on whether to increase the key interest rate.

With a referendum in Britain scheduled for June 21 on whether the country should remain within the European Union or not, the market has expected the Fed to put the interest rate on hold in June. However, the market had seen it likely for the Fed to raise the interest rate in July.

The U.S. stock markets closed lower on Friday, with the Dow Jones Industrial Average down 0.18 percent, the S&P 500 down 0.29 percent and the Nasdaq Composite Index 0.58 percent, respectively.

The U.S. dollar dropped against other major currencies. The dollar index, which treasures the greenback against six major peers, was down 1.58 percent at 94.050 in late trading.

In late New York trading, the euro rose to 1.1340 dollars from 1.1152 dollars of the previous session, and the British pound increased to 1.4515 dollars from 1.4430 dollars. The dollar bought 106.74 Japanese yen, lower than 108.84 yen of the previous session.

Meanwhile, oil prices ended lower on Friday on the downbeat jobs data and the failure at a meeting of the Organization of the Petroleum Exporting Countries (OPEC) to set an oil output quota.

The West Texas Intermediate for July delivery lost 55 cents to settle at 48.62 dollars a barrel on the New York Mercantile Exchange, while Brent crude for August delivery decreased 40 cents to close at 49.64 dollars a barrel on the London ICE Futures Exchange.

Nevertheless, investors are still putting their eyes on the expected speech by Fed chair Janet Yellen on Monday in Philadelphia.

"We stick to our view that the Fed will hike in September but we need to see a rebound in employment so risk is skewed toward a later hike," the Danske research team said.

"The probability of a June hike according to market pricing has fallen from around 30 percent to 10 percent, July from 70 percent to 40 percent and September from around 85 percent to 60 percent. A hike this year is no longer fully priced in," it added. Endi