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Benchmark 10-year Treasury yields fall

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US stock markets closed for President Jimmy Carter funeral

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Oil prices gain 1%

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European stocks recover early losses

By Chibuike Oguh, Nell Mackenzie

NEW YORK/LONDON, Jan 9 (Reuters) -

U.S. Treasury yields retreated from an eight-month high on

Thursday while the dollar strengthened against major currencies,

as markets weighed the Federal Reserve's interest rate cut moves

amid U.S. economic resilience.

The benchmark 10-year U.S. Treasury yield eased

to 4.661% from an overnight peak of 4.73%, which was the highest

since April 2024.

On Friday, the closely watched U.S. monthly payrolls report

will provide clues on the Fed's policy outlook. Markets are

fully pricing in just one 25-basis-point U.S. rate cut in 2025.

"Yields have come down a little bit heading into the

payroll number on Friday and it's indicative of where the level

of concern is, which is that maybe the move in yields has been

overdone," said Drew Matus, chief market strategist at MetLife

Investment Management in New Jersey.

Minutes of the Fed's December policy meeting released on

Wednesday showed officials were concerned President-elect Donald

Trump's proposed tariffs and immigration policies may prolong

the fight against inflation.

A market selloff in Treasuries continued on Wednesday after a

CNN report that Trump was considering declaring a national

economic emergency to provide a legal justification for a series

of universal levies on allies and adversaries.

U.S. stock markets were closed on Thursday to mark the

funeral of former U.S. president Jimmy Carter. U.S. bond markets

close early at 2 p.m. ET (1900 GMT).

"I put the fair value 10-year yield at 4.50% and yet we're

still at 4.66% heading into a report that will either show

continuing strength in the labor market, in which case the rate

cuts aren't the right thing to be doing, or show labor weakness

and will ratify the Fed's view of the world against the backdrop

of inflation that remains elevated and a high degree of

uncertainty in policy and economic outcomes."

European shares finished higher after paring early losses,

helped by gains in healthcare and basic materials stocks, which

was offset by declines in retailers. The pan-European STOXX 600

closed up 0.42%.

The U.S. dollar index traded near 109.54, its highest level

since November 2022, which it hit last week. The dollar index

, which measures the greenback against a basket of

currencies including the yen and the euro, rose 0.13% to 109.16,

with the euro down 0.18% at $1.0299.

The pound headed for its biggest three-day drop in nearly

two years, under pressure from a selloff in global bonds that

has hit gilts especially hard, driving yields to 16-1/2-year

highs, as concern mounts about Britain's finances.

Sterling was last down 0.49% at $1.230, having touched

its lowest since November 2023 earlier in the day.

China's yuan steadied near a 16-month low against the dollar as

the nation's central bank announced a record amount of offshore

yuan bill sales to support the currency.

Oil prices gained more than 1% as cold weather gripped parts

of the U.S. and Europe, driving up winter fuel demand.

Brent crude futures were up 1.17% at $77.05 a barrel.

U.S. West Texas Intermediate crude futures gained 1.06%

to $74.10.

Gold prices advanced. Spot gold rose 0.11% to

$2,665.05 an ounce. U.S. gold futures rose 0.58% to

$2,679.90 an ounce.