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Weekly Market Update Monday 9th October 2023

Equity market performance was mixed over the week as investors looked to Friday’s US jobs data for signs of how resilient the US labour market has been and what that might mean for interest rate expectations moving forward.

The U.S. labour market’s resilience continued to dampen the near-term prospects of a recession, as the gain of 336,000 jobs in September was the biggest in eight months and roughly double the number that most economists had been expecting. In addition, prior monthly estimates of jobs growth were revised upward and September’s unemployment rate was unchanged at 3.8%. One silver lining for markets can be found in the wage data. Average hourly earnings rose at a year-over-year pace of 4.15% in September, the fourth consecutive month of moderation and the lowest rate of growth since June 2021. While the acceleration in the rate of job growth may argue for the Fed to put in one last rate hike next month, the moderating pace of wage gains should be a helpful factor in driving ongoing moderation in inflation ahead.

US equities posted a small gain for the week whilst US technology recorded an almost 2% gain. European stocks ended 1.18% lower as bond yields surged amid worries about an extended period of higher interest rates, whilst the UK’s FTSE 100 also fell 1.49% as energy companies suffered from a declining oil price over the week. Stocks in Japan fell over the week, down 2.7%, as economic data releases showed that real wages and consumer spending continued to fall in August, weighing on sentiment. Whilst Chinese markets were closed last week, factory activity returned to expansion for the first time since March, the latest signal that the economy may have bottomed.

The higher for longer narrative around interest rates continues to weigh on fixed income markets as they endure one of their worst periods on record. The yield on the benchmark 10-year U.S. Treasury note spiked to another 16-year high of around 4.89% before settling at 4.79% to end the week. The yield on Germany’s 10-year government bond slipped back below 3% but remained near a decade-plus high. In the UK, the yield on the benchmark 10-year UK government bond held near its highest levels since August 2008 at 4.6%, on signs of sticky inflationary pressures.

Prospects of lower global demand for petroleum weighed on oil prices, and U.S. crude dropped to around $83 per barrel for a nearly 9% weekly decline, the biggest since March 2023. As recently as September 27, oil traded as high as $94—a year-to-date high. The price of gold fell on Thursday to its lowest level in seven months, with gold futures trading at around $1,816 per ounce, down from a recent peak of about $1,945 on September 20.

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