Sunday, October 4

The weak September payrolls report continued to drive markets: employers added 29,000 jobs, far below forecasts, and revisions erased another 60,000 jobs from prior months. The unemployment rate rose to 4.2% and wage growth slowed, pushing the probability of an October Fed hike below 25% from roughly 70% a week earlier. That repricing supported a broad Asia-Pacific advance and modestly higher S&P 500 futures, with technology shares leading and Nvidia extending its record-setting run.

Treasuries recovered slightly, but the 10-year yield remained around 5.25% after recently reaching its highest level since 2002. Persistent inflation concerns, government borrowing, corporate issuance tied to AI investment, and high energy prices are limiting the bond rally. The split between easier near-term Fed expectations and stubbornly high long yields leaves growth-stock valuations exposed; the October 7 FOMC minutes are the next policy signal.

Oil stayed above $100 a barrel as reports of Saudi-backed Yemeni operations and Houthi claims of attacks on Saudi Aramco sites raised concern about regional energy flows. Brent briefly topped $103 before retreating to about $101.50–$102.20; WTI traded near $90.75. The reported deployment of a third U.S. carrier strike group to the Middle East underlined the risk that the confrontation could widen.

The price response was restrained by counterweights to the supply threat: the G7 agreed to release as much as 100 million barrels of crude and fuel over four months, while expectations of recovering Gulf supply and Saudi Arabia’s lower benchmark price for Asian buyers also weighed. With oil still elevated, the reserve release may limit the immediate shock without removing the market’s exposure to further disruption.

French bond-market stress persisted as concerns about the government’s budget and deficit targets widened spreads, with pressure reaching Italian and Belgian debt. Reports of preparations for an early Spanish election added another source of political uncertainty around euro-area fiscal policy. The strain matters beyond sovereign markets: it raises the risk that higher financing costs collide with a weaker regional growth outlook.

September euro-area inflation accelerated more than expected, largely because of war-related energy costs. Yet markets still saw little chance of an October ECB rate increase, as fiscal and growth concerns weighed against the inflation surprise. That leaves policymakers facing a difficult trade-off: energy-driven price pressure is returning even as sovereign stress makes additional tightening harder to absorb.