Markets Rally as Fed Hike Bets Dim After Weaker Jobs Data

Global markets kicked off the week on a positive note as investors scaled back expectations for aggressive interest rate hikes by the Federal Reserve. This shift came after U.S. jobs data released last week showed slower-than-anticipated growth in September, along with significant downward revisions for the previous two months. The revised data significantly reduced the likelihood of another rate hike this month, with the CME FedWatch tool now indicating just a 22% chance of an October increase, down from 64% a week earlier.

The weaker jobs report eased pressure on bond markets, causing U.S. Treasury yields to retreat slightly. The 10-year yield fell to 5.2643%, while the two-year yield stood at 4.8143%. However, yields remain near multi-year highs due to government financial pressures, excessive bond issuance, and rising energy costs. Cedric Lam, senior investment strategist at Standard Chartered, suggested that while technical factors may temporarily delay a drop in yields, the selloff is not expected to last. He noted an opportunistic bullish outlook on U.S. 10-year government bonds.

Stocks across Asia and Europe saw gains as investors priced in a potential Fed pause. Japan’s Nikkei rose 2.0%, Australian stocks added 0.5%, and MSCI’s Asia-Pacific index outside Japan gained 0.15%. In Europe, Nasdaq and S&P 500 futures advanced, while EUROSTOXX 50 and FTSE futures also showed gains. The dollar weakened against major currencies, with the euro rising to $1.1243 and sterling ticking up to $1.3241. Against the yen, the dollar was marginally lower at 157.81.

In commodities, oil prices remained elevated following attacks on Saudi Aramco sites by Yemen’s Houthis. Brent crude futures held steady at $102.20 per barrel, while U.S. crude stood at $90.75 per barrel. Spot gold rose 0.3% to $4,154.32 an ounce.