GLOBAL MARKETS-Treasury yields keep rising on tariff fears and growth hopes, stocks suffer

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US jobs reports show mixed picture ahead of Friday's payrolls

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S&P 500, Nasdaq and Dow Jones all open in red

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European shares fall

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New US tariff report also in mix

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UK assets underperform - gilts, stocks, pound all fall

By Alun John

LONDON, Jan 8 (Reuters) - A global bond selloff continued on Wednesday, hurting stocks and boosting the dollar, on the back of evidence the U.S. economy is in good health, likely limiting further rate cuts, and renewed reports about U.S. tariffs.

The benchmark 10-year U.S. Treasury yield rose to as high as 4.73%, its highest since April 2024, building on Tuesday's 7 basis point (bp) rise.

The selloff in bonds on Wednesday accelerated after a CNN report that U.S. President-elect Donald Trump is considering declaring a national economic emergency to provide legal justification for a series of universal tariffs on allies and adversaries.

This feeds into investor uncertainty, which, say analysts, is already causing a higher "term premia" - effectively the additional yield investors demand to account for the uncertainty of investing in longer-dated bonds.

The report, and higher yields, also hurt shares, with the three main U.S. share benchmarks all opening slightly lower, extending declines from Tuesday.

The S&P 500 dropped 0.12% in the first few minutes of trading to 5,900 and the Nasdaq shed 0.1% to 19,460.

European stocks also dropped 0.5%, giving back an earlier gain, after the CNN report.

STRONG ECONOMY

Also weighing on U.S. Treasuries in recent weeks has been strong U.S. economic data, which has caused investors to scale back their expectations for the size of Federal Reserve rate cuts this year.

Markets are only fully pricing in one 25-bp rate cut in 2025, and see around a 60% chance of a second.

That picture was complicated somewhat on Wednesday by the ADP National Employment Report showing private payrolls rose by 122,000 jobs last month, lower than the 140,000 economists polled by Reuters were expecting.

However, a separate Labor Department report showed jobless claims stood at 201,000 last week, lower than estimates of 218,000, and numbers on Tuesday showed U.S. job openings unexpectedly increased in November.

Friday's non-farm payrolls data will give the most definitive picture.

"Obviously the big theme of the week is higher U.S. yields, and stronger dollar," said Samy Chaar, chief economist at Lombard Odier.

"The U.S. cycle is an income-growth consumption-led cycle, and when you look at it from that angle it gives a lot of importance to labour markets - for it to continue people need to have a job and incomes, and that's why the market reacted so much to the (job openings) data."

"The second theme is the erratic and volatile political comments."

European wind stocks took a beating Wednesday after Trump called turbines 'garbage' while defence stocks gained after he called for higher defence spending from NATO allies.

BRITISH SELLOFF

The reaction in British markets on Wednesday was more dramatic than that elsewhere.

The British 10-year gilt yield rose over 11 bps to 4.80%, its highest since 2008, while the pound fell 1.15% against the dollar to $1.2335, and domestic-focused British midcap stocks dropped 1.76%.

German 10-year Bund yields rose just 4 bps and the euro EUR=EBS> dropped 0.5% to $1.0286.

"It seems there's a lot of negativity around the UK," said Lyn Graham-Taylor, senior rates strategist at Rabobank

"This increase in yields is increasing the chance of the fiscal headroom falling to nothing so there's an increased probability of having to raise taxes or cut spending in the next budget."

Asian stocks had struggled earlier in the day, with MSCI's broadest index of Asia-Pacific shares outside Japan dropping 0.57%.

Chinese markets were again the focus. Onshore blue-chips and Hong Kong were each down 1.7% earlier in the day, but rebounded and closed only just in negative territory as traders digested Beijing's latest efforts to soothe investor nerves after a stuttering economic start to the year.

In commodities, oil prices initially rose on reduced supply from Russia and OPEC members, but then lost ground in the face of the stronger dollar.

Brent crude was last up 0.1% at $77.16 per barrel, while U.S. West Texas Intermediate (WTI) crude was flat at $74.30.

(Additional reporting by Ankur Bannerjee in Singapore and Harry Robertson in London. Editing by Mark Potter)