US Jobs Shock and G7 Oil Release Reshape Global Markets
TREE NEWS reports: Two major macroeconomic events dominated global markets on Friday: a sharply weaker-than-expected US September nonfarm payrolls report and a coordinated G7 decision to release 100 million barrels of emergency oil reserves. The payrolls data showed only 29,000 jobs added last month, far below the 90,000 consensus estimate, while the unemployment rate ticked up to 4.2% from 4.1%. The G7 move, coordinated through the International Energy Agency, will unfold over four months, with a large-scale diesel release in the first 20 days.
Market Reaction
US equities rallied on the jobs miss, with the Nasdaq rising over 1% to a record close and the S&P 500 adding 0.73%. Nvidia hit an intraday record for the first time in over four months, while Tesla jumped nearly 5% on better-than-expected quarterly deliveries. However, the week ended mixed, with the S&P 500 down 0.27% and the Dow off 1.26% for the week.
Bond markets saw a sharp reversal. The 10-year Treasury yield initially fell to a daily low after the payrolls report, then sold off to rise about 3 basis points on the day and 11 basis points for the week, ending near 5.27%. The 2-year yield rose 3 basis points on the day but fell 3 basis points for the week. The dollar index dropped from a one-and-a-half-year high, and offshore yuan briefly approached 6.70.
Commodities were volatile. WTI crude fell nearly 2% to $91.11 per barrel, with an intraday drop of over 5% following the G7 announcement, while Brent ended nearly flat at $102.25 but gained 4.94% for the week. Gold fell 0.94% to $4,133.70 per ounce, posting a 3.59% weekly loss—its worst week in four months. Silver dropped 1.23% and lost 6.68% for the week.
Policy Implications
The weak jobs report significantly reduced expectations for an October rate hike. Market-implied odds for a hike fell from around 22% to 17%, and cumulative tightening expectations for the remaining two meetings of the year dropped to about 21 basis points. The ‘new Fed whisperer’ noted that the report did not change the Fed’s stance, but September CPI will be more important. White House economic adviser Kevin Hassett called the report ‘in line with expectations’ and reiterated that interest rates are ‘unacceptably high.’
The G7 oil release is a direct response to soaring fuel prices, with French President Emmanuel Macron pushing for coordinated action. The move aims to lower fuel costs and avoid export restrictions among member states. However, OPEC+ production capacity reviews have been delayed to mid-November due to US-Iran tensions, adding uncertainty to future supply.
Key Takeaways for Investors
- Rate expectations are shifting: Weak jobs data reduces near-term rate hike odds, but the Fed remains data-dependent. Watch September CPI for clearer direction.
- Oil volatility ahead: The G7 release may cap prices temporarily, but geopolitical risks and OPEC+ delays could keep markets jittery.
- Equities resilient: Tech and growth stocks continue to lead, but breadth remains narrow. Tesla and Nvidia strength contrasts with weakness in storage chip stocks.
- Currency watch: Dollar weakness could support emerging market assets and commodities, but the yuan’s move is noteworthy.
- Hong Kong selloff: The Hang Seng fell 2.6%, its worst day since March, with tech and auto stocks leading losses. Chinese mRNA deal with Novartis highlights ongoing innovation.
Investors should brace for continued volatility as markets digest mixed economic signals, geopolitical tensions, and shifting monetary policy expectations.
