Traders work in the Hana Bank dealing room in Seoul, South Korea. (AP Photo)
Equities rallied on Oct. 5 after a big miss on U.S. jobs creation gave the Federal Reserve breathing room to hold off an interest rate hike this month, while traders were also cheered by another drop in oil prices that eased inflation concerns.
Investors in Asia followed the positive lead from their colleagues on Wall Street, where all three main indexes spiked in reaction to the highly anticipated non-farm payrolls data.
The report showed the world’s top economy created just 29,000 jobs in September, well short of forecasts for around 90,000, while the readings for the previous two months were also revised down, with July’s showing posts were actually lost.
Markets immediately repriced the likelihood of a Fed rate hike, with CME’s FedWatch tool seeing just over a 20 percent chance, compared with more than 65 percent early last week.
Expectations that interest rates would be lifted at least once more this year, after September’s hike, have sent government borrowing costs soaring, with 10-year U.S. Treasury yields last week hitting a 24-year high.
The spike has been driven by stubbornly high inflation, government spending and an increase in companies borrowing to pay for their AI investments.
“The recent hiring trend has settled into that not-too-hot, not-too-cold Goldilocks porridge zone of roughly 40,000 to 60,000 jobs a month,” wrote Stephen Innes at SPI Asset Management.
“Core PCE [personal consumption expenditure] is still uncomfortable at three percent year over year, but the shorter-term pulse has cooled noticeably,” he added, referring to the Fed’s preferred gauge of inflation.
“Put the two together, and October starts looking less like a meeting the Fed needs to attack and more like one it can comfortably sit through, spoon still in hand, while December remains the bowl with a little more heat in it.”
