Stocks Rise Dollar Strengthens as Fed Rate Hike Hopes Dim

Global stock markets began the week on a positive note, while the US dollar strengthened against the euro. Investors scaled back expectations of a Federal Reserve rate hike in October due to uncertainty around inflation, though the possibility of further tightening remains. The US jobs report for September showed slower-than-expected growth, leading markets to believe another rate hike this month is unlikely. Jose Torres, senior economist at Interactive Brokers, noted that labor conditions are stable but revised job numbers indicate economic challenges, making further rate hikes less likely.

The reduced likelihood of a Fed rate hike boosted Asian markets, with Japan’s Nikkei rising 2.5% and MSCI’s Asia-Pacific index gaining 0.9%. US stock futures showed modest gains, with Nasdaq futures up 0.17% and S&P 500 futures flat. European markets also saw gains, with EUROSTOXX 50 futures up 0.3% and FTSE futures rising 0.4%. In Brazil, markets were poised for a jump after Senator Flavio Bolsonaro advanced to the presidential runoff election.

The dollar climbed higher, supported by elevated US Treasury yields and a weaker euro, which slid to a 17-month low. Jane Foley, head of FX strategy at Rabobank, cited concerns about fiscal worries in France and broader risks to the euro, including energy prices and geopolitical tensions. The dollar rose 0.12% against the yen and 0.25% against sterling. Bond yields remained near multi-year highs due to government finance pressures and high energy costs.

In commodities, oil prices dipped as increased Middle East exports and G7 oil stock releases offset concerns about Gulf oil infrastructure. Brent crude futures fell 0.7% to $101.52 per barrel, while US crude slid over 1% to $90.11. Spot gold remained steady at $4,143.82 an ounce. OPEC+ decided to keep November oil output targets unchanged, while traders expressed caution about buying US Treasuries without improvement in Middle East tensions.