Highlights
U.S. equity markets ended the week on a mixed note as investors balanced a softer-than-anticipated employment report and reduced expectations for another Federal Reserve rate increase against still-elevated Treasury yields, volatile oil prices, and continued uncertainty over the U.S.-Iran conflict. The S&P 500 declined 0.27%, while the Dow shed 1.26%; the Nasdaq, meanwhile, edged up 0.65% to close at 30,807.93 while the Russell 2000 was broadly unchanged. Bond markets remained a major focus. Longer-dated Treasury yields climbed to their highest levels in several decades before pulling back later in the week, reflecting changing expectations for monetary policy and inflation. In a week that saw a slew of data reports coming in, the Bureau of Labor Statistics (BLS) reported Friday that U.S. employers added just 29,000 jobs in September, substantially below the approximately 90,000 increase economists had anticipated. Combined payroll growth for July and August was reduced by 60,000 while the unemployment rate edged up to 4.2% from 4.1%. Other labour-market indicators delivered a mixed picture during the week. ADP reported that private-sector employers added 90,000 jobs in September, up considerably from August’s revised 36,000 gain. In contrast, BLS data showed that job openings declined to 7.08 million in August from a revised 7.34 million in July. Financial markets responded positively to the weaker employment figures, with U.S. stock futures rising and Treasury yields falling after the report was released on Friday. Separately, the Bureau of Economic Analysis (BEA) reported that the personal consumption expenditures (PCE) price index increased 0.3% in August and was 3.4% higher than a year earlier. The BEA also significantly upgraded its estimate of second-quarter real GDP growth to a 2.2% annualized pace, compared with the previous estimate of 1.5%. Moving across to Europe, the pan European Euro STOXX 600 shed 1.20% week-on-week. European equities faced pressure from a combination of high oil prices and elevated sovereign bond yields. Stronger-than-expected inflation data further reinforced concerns that European central banks may need to maintain restrictive monetary policies for longer. Brent crude climbed above USD 108 per barrel early in the week as expectations for progress in U.S.-Iran negotiations weakened. The increase in oil prices renewed concerns about inflation and contributed to higher government borrowing costs. Meanwhile, revised figures coming out of the U.K. showed that the UK economy grew 0.5% in the second quarter, slightly above the previous estimate of 0.4%. Despite the stronger growth figure, elevated gilt yields continued to create headwinds for sectors that are particularly sensitive to borrowing costs. In Asia, Japanese equities delivered mixed returns during the week. The Nikkei 225 advanced 2.93%, while the broader TOPIX declined 0.91%. The strongest gains were concentrated in AI and semiconductor-related companies, supported by continued strength in global technology stocks and renewed optimism surrounding future demand for AI infrastructure. Broader market sentiment remained more cautious, however, amid elevated Japanese government bond yields and expectations that the Bank of Japan would continue tightening monetary policy. Finally, Chinese equities declined during the week, although mainland markets were closed Thursday and Friday for the Golden Week holiday.
Data Highlights
USD JOLTs Job Openings (Aug) fell from 7.335M to 7.079M, analysts expected 7.23M. USD ADP Employment Change (Sep) rose from 36K to 90K, higher than the expected increase to 70K. USD GDP Growth Rate QoQ (Q2) fell -30bps, from 2.5% to 2.2%, consensus was for a -100bps decrease, from 2.5% to 1.5%. USD Core PCE Price Index YoY (Aug) stayed the same at 3%, against consensus expectations for a +30bps rise, from 3% to 3.3%. USD Nonfarm Payrolls (Sep) fell from 133K to 29K, against expectations for a softer decline to 90K. USD Unemployment Rate (Sep) rose +10bps, from 4.1% to 4.2%, expectations were for an unchanged print. CHF Inflation Rate YoY (Sep) rose +20bps, from 0.8% to 1%, in line with expectations. CHF Retail Sales YoY (Aug) rose, +60bps from 2.6% to 3.2%, against views for a -40bps decrease, from 2.6% to 2.2%. EUR Unemployment Rate (Aug) was unchanged at 6.4%, in line with expectations. EUR Inflation Rate YoY (Sep) rose +60bps, from 3.2% to 3.8%, more than the expected rise to 3.6%. EUR Core Inflation Rate YoY (Sep) rose +10bps, from 2.4% to 2.5%, in line with expectations. JPY Unemployment Rate (Aug) rose +10bps from 2.4% to 2.5%, consensus wrongly expected an unchanged print. AUD RBA Interest Rate Decision rose +25bps, from 4.35% to 4.6%, in line with expectations.
Week Ahead
USD ISM Services PMI (Sep) – Monday | CHF Unemployment Rate (Sep), EUR Retail Sales MoM (Aug), EUR Retail Sales YoY (Aug), USD ADP Employment Change Weekly – Tuesday | CAD Unemployment Rate (Sep) – Friday
