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Blow to Donald Trump as U.S. jobs growth slows down

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While Janet Yellen and her Federal Reserve colleagues are poised to raise interest rates at their meeting this month, investors increasingly doubt the central bank's projection for additional hikes following soft reports on US employment and inflation.

Nonfarm payrolls rose by a seasonally adjusted 138,000 in May from the prior month, the Labor Department said Friday.

A separate report from the Commerce Department showed that the USA trade deficit widened by more than expected in April.

A more prolonged stretch of weak inflation might indicate inflation expectations had slipped below the Fed's 2% target, and that "would have more far-reaching consequences for the path of policy than anything we've seen today", he said. "September was always going to be a struggle because of its proximity to the debt ceiling debate", said Ian Lyngen, head of USA rates strategy at BMO Capital Markets. "The Fed can view this as a maybe tightening labor market but one that is not so tight it creates inflation pressure", he said. Initial claims for jobless benefits as a percentage of total employment have never been lower since state programs began in the 1940s, Price said.

The dollar index was little changed although the greenback was up 0.1 percent against the yen.

Financial stocks in Britain lifted the FTSE 100 index of top United Kingdom blue chips to all-time peaks while Germany's DAX index also set new highs.

While officials welcome the economy's gains, they don't want to let it overheat, sending inflation too high.

Data showing a healthy uptick in private sector hiring and factory activity during May bolstered expectations that the US economy was picking up speed and lifted stocks on Wall Street after two days of losses. The Dow Jones Industrial Average rose 30.79 points, or 0.15 percent, to 21,174.97.

People walk past an electronic board showing stock prices outside a brokerage at a business district in Tokyo, Japan, January 23, 2017. Despite clear signs that the labor market is slowing down, analysts doubted that weaker May numbers would prompt the Federal Reserve to delay an expected hike in interest rates at its June meeting.

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"A hike in June is still on the table but the news flow will have to improve for the Fed to keep tightening in the second part of the year", said Thomas Julien, U.S. economist, at Natixis North America in NY.

With the mood on the global stock markets broadly buoyant, the commodity bloc of currencies led by the Australian and Canadian dollar were all around 0.2 percent higher.

Long-dated U.S. Treasury yields fell to almost seven-month lows while short-dated yields touched their lowest in more than two weeks after the U.S. employment data suggested a cautious Fed policy beyond June.

The dollar gained 0.3 percent to 111.65 yen, extending its rebound from Wednesday's near two-week low of 110.485 yen.

Oil prices were dragged down by ongoing concerns over a global glut in crude supply despite a bigger-than-expected draw in USA crude inventories.

Benchmark Brent crude futures were off 91 cents at $49.72 a barrel. U.S. West Texas Intermediate crude futures fell 52 cents to $47.84 per barrel.

In broader terms, it has been rallying off and on for the best part of two years on the assumption that US interest rates would continue to rise while those in Japan and Europe stayed below zero.

Spot gold rose 0.89 percent to $1,276.50 an ounce, its highest since April 25, headed for its fourth week of gains.

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