Investors had been cautious ahead of Friday’s non-farm payrolls report, in which US employers added 336,000 jobs in September, nearly double the 170,000 expected. Stocks initially sold off after the release, however they turned higher as investors digested the details, taking comfort in the fact that average hourly earnings rose 0.2%, taking the year-on-year gain to its lowest level since June 2021. Following the report, traders are now indicating a 32% chance of an interest rate hike from the Federal Reserve in November, according to CME Group’s FedWatch tool.
For the week the S&P 500 added 0.5% to snap a four-week losing streak. It is notable that much of the gains were powered by mega-cap tech names, with the gap between the S&P 500 and its equally weighted index remaining wide. The tech-heavy Nasdaq added 1.6% for the week, while the Dow Jones ended marginally lower, and the small-cap Russell 2000 was down nearly 2%. The yield on the 10-year Treasury note touched a fresh 16-year high of around 4.89% early after the jobs report, but retreated amidst the equity rally. It ended the week at 4.79%, up from 4.57% the prior week.
European equities recorded losses, with the pan-European STOXX 600 down 1.2%, as investors remained wary about surging bond yields and the prospect of interest rates staying higher for longer. Weak economic data out of the eurozone also did little to lift sentiment. Retail sales for August dropped by more than expected, the finalised composite PMI saw its fourth month in contraction, although a bright spot was German industrial orders rebounding 3.9%. The euro touched its lowest level of the year against the US dollar on rate worries, while eurozone government bond yields remained elevated.
On Wednesday the Bank of Japan offered to purchase ¥675bn of Japanese government bonds at maturities of between five and 10 years, an unscheduled move as sovereign yields continue to press higher. The yield on the 10-year JGB had hit a 10-year high. Meanwhile the yen had weakened below the key ¥150 to the US dollar level, the first time since October 2022, however it bounced sharply higher. This prompted speculation that Japanese policymakers may have intervened in currency markets. Japan’s Nikkei 225 lost 2.7% for the week.
In a holiday shortened week, Hong Kong’s Hang Seng saw a modest 0.1% drop, while mainland China markets were closed for the week. There were slightly more positive signs from the troubled property sector, with Sunac winning court approval for its offshore debt restructuring, the first major Chinese developer to get approval for its restructuring plans. Meanwhile new home sales from the top 100 developers saw a smaller drop in September than was recorded in the previous month.
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