Monster payrolls see 10-year Treasury yields top 4%
A look at the day ahead in U.S. and global markets from Mike Dolan
With any thought of U.S. recession off the agenda after a monster September jobs report, doubts about the extent of further Federal Reserve easing have inevitably re-emerged - and now need a cool inflation report this week to keep in check.
Any which way you cut it, last month's employment report was a robust reading of a labor market in rude health. With payroll gains of 254,000 - more than 100,000 above forecast - a decline in the jobless rate to 4.1% and a pickup in annual wage growth to 4%.
Indeed, 4% seems to be the magic number as the week unfolds.
The strength of the report whacked Treasuries US2YT=RR by taking a quarter point out of Fed rate cut expectations through the end of next year and ensured the dollar .DXY recorded its best week in two years.
Ten-year yields US10YR=RR, which leapt more than 20 basis points over last week, topped 4% on Monday for the first time in two months and 2-year yields were stalking 4% too - flattening the 2-10-year yield curve to near zero in the process.
Fed futures pricing has now not only removed all chance of another half point cut next month, but is even starting to see doubts creep in about any cut at all in November - with only 23 bps in the price and no more than 50bp for rest of this year.
And the "terminal rate" in this Fed cycle has now jumped to as high as 3.25% - above the 3% landing zone broadly assumed after the central bank's first outsize cut last month and above the 2.9% level Fed policymakers had indicated as long-term "neutral".
The dollar index .DXY held last week's 2.1% surge first thing on Monday, not least with euro EUR= hit with another set of dire German industrial orders that stoked speculation of a third European Central Bank cut of the year in 10 days' time.
French Central Bank Chief Francois Villeroy de Galhau said there would "quite probably" be another rate cut this month. "Now we must also pay attention to the opposite risk, of undershooting our (inflation) objective due to a weak growth and a restrictive monetary policy for too long."
And yet, far from running scared from the borrowing rate rethink, Wall Street stocks .SPX lapped up the seeming removal of recession risk on Friday and set a record high close at 5,765 points.
CRUDE OIL PRICES
The payrolls report saw Goldman Sachs lower the odds on recession over the next 12 months by 5 percentage points to 15% - less than where it would be on any 12 month view historically - and lift its 12-month S&P500 target by 300 points to 6,300. That's some 10% higher than Friday's close.
The third-quarter corporate earnings season kicks off later this week and aggregate annual profit growth is set to have expanded 5%-10% during the three months.
But the rates picture will now likely be in thrall to the September consumer price report on Thursday, which is expected to see headline inflation inch down further to a three-year low of 2.3% - and within a whisker of the Fed's target. While "core" inflation likely remained above 3%, the constellation of robust jobs growth and ebbing, near-target inflation is as good as the central bank could wish for at this point of the cycle.
One possible fly in the ointment is latest rebound in crude oil prices - which were clocking annual losses of more than 20% all through September but have reared up over the past week amid heightened Middle East tensions and a standoff between Israel and Iran.
On the first anniversary of the Hamas attacks on Israel that have spurred 12 months of intense conflict, crude oil CLc1 edged up further to $76 per barrel - although they remain about 8% lower than they were a year ago.
The U.S. election is also less than a month away, with non-partisan analysis showing Republican Donald Trump's economic plans would raise the Federal debt by roughly double the increase under Democrat Kamala Harris' plans.
Trump said on Sunday he would slap tariffs as high as 200% on vehicles imported from Mexico as he ratchets up a protectionist trade stance.
Elsewhere, Tokyo and Hong Kong shares were up more than 1% - largely a catchup on Friday's payrolls surprise. European stocks and U.S. futures fell back.
Key developments that should provide more direction to U.S. markets later on Monday:
* U.S. August consumer credit; Mexico August jobless rate
* St. Louis Federal Reserve President Alberto Musalem, Minneapolis Fed President Neel Kashkari and Atlanta Fed chief Raphael Bostic all speak
* Euro zone finance ministers meeting in Luxembourg to discuss European productivity and progress towards capital markets union
* US Treasury auctions 3-, 6-month bills
US payrolls boom way more than forecast https://reut.rs/3YdTl8L
US annual hourly wages growth picks up again https://tmsnrt.rs/3COG6Cc
Global supply chain pressures remain calm https://reut.rs/3ZO8ekf
Q3 earnings seen positive for most S&P 500 sectors https://reut.rs/3Bv5SNg
Where Tropical Storm Milton is expected to hit https://reut.rs/3Yd4Azi
By Mike Dolan; Editing by Alison Williams
mike.dolan@thomsonreuters.com
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.
