Weaker US Jobs Data Triggers Market Relief Rally

Global equities surged on October 5 after the latest U.S. jobs report showed weaker-than-expected hiring, easing concerns about further interest rate hikes. The non-farm payrolls data revealed just 29,000 new jobs in September, far below the anticipated 90,000, while previous months’ figures were also revised downward.

Traders reacted by significantly lowering the odds of a Fed rate hike this month, with CME’s FedWatch tool showing a drop from 65% to just over 20%. The data suggested the economy is settling into a 'Goldilocks' zone, neither too hot nor too cold, with job gains averaging between 40,000 and 60,000 monthly, according to Stephen Innes at SPI Asset Management.

Lower oil prices also contributed to the rally, further reducing inflation worries. While core PCE inflation remains at 3% year-over-year, its shorter-term trend has cooled. Analysts now believe the Fed may skip a rate hike in October, with December still a possibility.

The recent spike in government borrowing costs, driven by high inflation, government spending, and corporate borrowing for AI investments, has added pressure on markets. However, the latest jobs report provided some relief, allowing investors to breathe easier.