Stocks Rally as Fed Hike Expectations Dim on Soft US Jobs Data

Global stocks started the week on a positive note, with the dollar weakening as investors scaled back expectations for aggressive interest rate hikes by the Federal Reserve. The shift in sentiment came after recent US jobs data showed slower-than-anticipated growth in September, alongside downward revisions for the previous two months. This reduced the likelihood of another rate hike this month, with investors now pricing in just a 22% chance, down from 64% a week earlier, according to the CME FedWatch tool.

The softer jobs data boosted Asian markets, with Japan's Nikkei rising 2% and Australian stocks gaining 0.5%. MSCI's Asia-Pacific index outside Japan also edged up 0.15%. Meanwhile, US stock futures showed gains, with Nasdaq futures up 0.3% and S&P 500 futures rising 0.1%. European markets also saw positive movements, with EUROSTOXX 50 futures gaining 0.3% and FTSE futures adding 0.4%. In Brazil, markets were expected to rise later in the day following the country's presidential election results.

Bond yields retreated slightly after a recent selloff, with the 10-year US Treasury yield at 5.2643% and the two-year yield at 4.8143%. Despite the slight dip, yields remain near multi-year highs due to government financing pressures, high issuance volumes, and elevated energy costs. The dollar weakened against major currencies, with the euro rebounding from a 17-month low to $1.1243 and sterling ticking higher to $1.3241. Against the yen, the dollar was marginally down at 157.81.

In commodities, oil prices remained elevated after Yemen's Houthis launched attacks on Saudi Aramco sites. Brent crude futures stood at $102.20 per barrel, while US crude was at $90.75 per barrel. Spot gold rose 0.3% to $4,154.32 an ounce.