Wall Street stocks jumped and US bond yields fell Friday after data showed that job creation withered last month, while oil prices slumped as G7 leaders held urgent talks to coordinate action on lowering fuel prices.
Employment in the US grew by 29,000 jobs in September, missing analysts’ expectations of around 90,000, with the unemployment rate rising slightly to 4.2%.
Adding to the weak data, the Bureau of Labor Statistics (BLS) also revised down job figures for July and August by a combined 60,000, the department said in a statement.
The revision to July’s data showed that the world’s largest economy lost jobs that month, as opposed to posting a gain of 21,000 as previously reported.
“Today’s report may revive the ‘bad news is good news’ narrative, but hoping for a weaker labour market just to secure easier financial conditions is a poor tradeoff,” said etoro analyst Bret Kenwell.
The yield on the 10-year US Treasury note briefly fell below 5.2% while Wall Street’s main stock indices rose at the start of trading, as investors saw the weak labour market as further reducing the likelihood of another immediate interest rate hike by the Federal Reserve.
Markets have been unnerved in recent weeks by fresh multi-year peaks for government bond yields, especially in the United States, as central banks raise interest rates in a bid to cool inflation.
Eurozone inflation surged to 3.8% in September, the highest level in three years, as the war in the Middle East fuelled a surge in energy costs, official data showed Friday.
Investors now see only a one-in-five chance of the Fed hiking rates at its meeting later this month, though a majority see it raising rates by a quarter or half percentage point in December.
Last month the Fed raised interest rates for the first time since 2023, as its chief Kevin Warsh stressed the need to combat inflation that has been “too high” for “too long”.
“Inflation remains a problem,” said etoro’s Kenwell.
“A breakdown in the labour market would create an entirely different one,” he added, since “a meaningful deterioration in hiring and income would eventually weigh on consumer spending and economic growth.”
WTI drops
US oil prices dropped sharply – as much as 5% at one point – as G7 leaders held urgent talks to coordinate action on lowering fuel prices, after the EU said earlier it would work with the International Energy Agency on releasing further stocks to global markets.
It came with EU nations holding crisis talks following pressure from President Donald Trump to tap the bloc’s strategic diesel reserves to face a US ban on diesel exports.
“We fully reject any ban on diesel,” European Commission spokeswoman Anna-Kaisa Itkonen said Friday.
“Diesel is now a macro problem as much as an energy one, feeding directly into freight, food, industry, inflation and ultimately bond yields,” noted Stephen Innes of SPI Asset Management.
“Strategic stock releases can cool the immediate price shock, but drawing down insurance ahead of winter is hardly a comfortable signal,” he added.
