Payrolls rise just 29,000, rate-hike bets plunge; gold drops 3%, French yields hit 2002 high

US economic data weakened in succession last week. September consumer confidence fell to its lowest since 2014, several August PCE inflation measures undershot forecasts, and September nonfarm payrolls rose by only 29,000. Investors sharply reduced bets on another Fed rate increase in October. Expectations had remained elevated early in the week, when gold slumped more than 3% on September 28 to below $4,200 an ounce. Gold lost around 6.5% in September. Oil alternated between the influence of US–Iran tensions and recovering Saudi Red Sea exports, with Brent fluctuating above $100 a barrel. OPEC+ decided to hold November output unchanged. In Europe, France's 10-year government bond yield reached its highest since 2002.

Weekly overview: Weak data reverses the rise in rate-increase expectations

Markets began the week pricing in another Fed increase in October. CME FedWatch put the probability at around 65% as of September 28. The 10-year Treasury yield stood at 5.25% on September 29.

Subsequent data were weak. On September 29, the Conference Board reported that its September consumer confidence index fell to 81.9 from 88.6, well below the 89.2 expected in a Reuters poll and the lowest since 2014. The Present Situation Index fell 7.9 points to 109.3, and the Expectations Index fell 5.9 points to 63.6. Respondents were mainly concerned about rising prices and fuel costs.

On September 30, the Commerce Department reported that August PCE prices rose 3.4% year on year and 0.3% month on month. Core PCE rose 3.0% annually and 0.2% monthly. Apart from the headline monthly reading, which matched expectations, the other three measures undershot forecasts, reducing bets on an October increase. The third estimate of second-quarter GDP, released the same day, was revised up to an annualized 2.2% from 1.5% in the second estimate. ADP reported 90,000 additional private-sector jobs in September, above the 75,000 expected.

On October 2, the Bureau of Labor Statistics reported September nonfarm payroll growth of 29,000, versus a market expectation of around 90,000 compiled by FactSet. Unemployment was 4.2%, remaining within the 4.1%–4.3% range seen since March. Combined payroll gains for July and August were revised down by around 60,000. After the release, the priced probability of an October Fed increase fell to about 14%, and the 10-year Treasury yield eased to around 5.17%. A visibly cooling labor market weakened the case for further tightening, although high oil prices and sticky inflation left the policy outlook disputed.

Foreign exchange: Dollar posts largest monthly gain since June

The dollar index closed at 101.45 on September 30, gaining around 2.0% for September, its largest monthly increase since June.

In France, the government unveiled its draft 2027 budget on October 1, proposing an additional €43 billion in spending cuts to reduce the deficit from 5.4% to 5.0% of GDP. Public debt already stood at around 119% of GDP, and planned borrowing for next year reached a record €340 billion. With the 2027 presidential election approaching, concerns over fiscal sustainability increased. France's 10-year government bond yield rose to 4.96% on October 1, its highest since July 2002. The 10-year French–German yield spread widened beyond 140 basis points, the most since 2012.

Gold: One-day loss exceeds 3% and September decline reaches about 6.5%

On September 28, higher Treasury yields, a stronger dollar, rising expectations of an October increase and oil-driven inflation concerns pushed spot gold down as much as around 3.3%, below $4,200 an ounce. Spot silver fell as much as about 5.1%. Spot gold closed at $4,158.70 on September 30, down around 6.5% for the month and ending a two-month winning streak.

Gold briefly rose more than 1% after the October 2 payrolls report but failed to hold its gains, finishing slightly lower. Reduced tightening expectations supported prices, while still-high Treasury yields limited the rebound.

Oil: US–Iran tensions alternate with recovering exports

On September 28, Trump's rejection of Iran's proposal to reopen the Strait of Hormuz within seven days sent Brent back above $100 a barrel. Saudi Arabia resumed crude loading at Yanbu on September 29, with nearly 10 million barrels already loaded at Yanbu and Al Muajjiz. Bloomberg reported that East–West pipeline flows had recovered to at least 3.5 million barrels per day, around half capacity. Brent fell 2.6% that day to $102.59 a barrel and WTI dropped 3.5% to $89.38. Preliminary Kpler data showed a marked recovery in September crude exports from major Middle Eastern producers, although they still relied on more costly ship-to-ship transfers.

On October 1, media reports that the United States planned to send a third aircraft carrier to the Middle East lifted Brent more than 4% to a settlement of $102.31 a barrel. WTI settled at $92.87.

On October 4, seven OPEC+ members, including Saudi Arabia and Russia, met online and held November output targets at 31.01 million barrels per day. This was the second consecutive monthly pause in increases, following combined increases of 752,000 barrels per day over the previous four months. The next meeting was scheduled for November 1.

Equities: Early pressure gives way to a post-payrolls rebound

High yields and weakening consumer confidence weighed on equities early in the week. On September 29, the S&P 500 closed at 7,670.84, the Nasdaq at 26,797.54 and the Dow at 51,349.92. The VIX volatility index closed at 16.04.

Weak employment data eased tightening concerns. On October 2, the Nasdaq gained 1.2% to 27,190.86, the S&P 500 rose 0.7% to 7,722.72 and the Dow advanced 0.5% to 51,176.96. Compared with the September 25 close, the Nasdaq gained 0.5% for the week, while the S&P 500 fell 0.3% and the Dow declined 1.3%.

Cryptocurrencies: Prices rise after PCE and ETF inflows continue

Bitcoin declined with other risk assets to around $83,000 on September 28. After the September 30 PCE release, it briefly rose above $85,500. Over the third quarter, Bitcoin gained around 44% and Ether around 70.9%.

US spot Bitcoin ETFs recorded net inflows of approximately $103 million on October 1 and $190 million on October 2.

Events to watch this week (Beijing time)

Risk notice: This material is for reference only and does not constitute investment advice. Financial markets involve risk, and past performance does not indicate future results.