The latest US jobs report exceeded expectations, showing a significant increase in nonfarm payrolls and impacting various financial markets. According to the Department of Labor, 336,000 jobs were added last month, surpassing the forecasted 170,000 by economists polled by Reuters. Additionally, data for August was revised to show 227,000 jobs added, up from the initially reported 187,000.
This robust jobs data has raised concerns over the Federal Reserve maintaining high interest rates for an extended period to curb inflation. Marvin Loh, a senior global macro strategist at State Street in Boston, suggested that the economy might have undergone structural changes requiring higher real yields than in the pre-pandemic period.
Following the report, the yield on the benchmark 10-year Treasury note rose sharply to a new 16-year high of 4.8874 percent, reflecting a significant sell-off in the bond market. As bond yields and prices move inversely, this increase indicates a drop in bond prices.
Futures traders have adjusted their expectations, with the probability of a Fed rate hike in November increasing to 30.7 percent, based on CME Group’s FedWatch Tool. The Fed’s overnight rate is now anticipated to stay above 5 percent through next July.
Gennadiy Goldberg, head of US rates strategy at TD Securities USA, suggested that a continued positive data trend might push the 10-year yields towards the 5 percent mark.
In response to the jobs report, the dollar index rose, heading towards a 12-week winning streak. The yen weakened further against the dollar, approaching a level that could prompt intervention by Japanese officials. Simultaneously, the euro is on track for a record 12 straight weeks of declines against the dollar.
Stocks on Wall Street initially fell across all S&P 500 sectors but later saw some recovery, particularly in the Nasdaq. European markets also pared gains after the data release.
The robust jobs data have also impacted oil prices, which faced a steep weekly decline amid concerns that persistently high interest rates could hinder global economic growth and fuel demand. Additionally, Russia’s decision to lift a ban on pipeline diesel exports via ports contributed to the downward pressure on oil prices.
In the Eurozone, bond yields rose, and the gap between German and Italian borrowing costs widened, indicating stress in Italian finances. This period saw substantial weekly outflows from global bond funds.
The US jobs report has had a significant ripple effect across various financial markets, influencing stocks, bonds, currencies, and commodities.
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