Overall, markets traded with a mixed weekly direction. Moderate underlying economic momentum continued to support risk assets, but equity gains were limited through the week as higher rates kept growth expectations in check. The S&P 500 finished the week slightly higher, with Thursday’s best session gains partly reversed on Friday, after US payrolls jumped more than expected, sparking a hawkish repricing that sent rates higher. August payrolls grew 162k versus a 55k consensus, topping estimates, with the unemployment rate at 4.1% versus 4.1% est. Attention then turned to upcoming CPI data.
Technology led most of the week, but AI-related weakness persisted, and Broadcom shares fell despite a ninth consecutive beat and sharply higher AI semiconductor revenue; the pattern also appeared in Cisco, Samsung, and Nvidia, as fourth-quarter guidance missed expectations and weighed on shares. Energy stood out as crude oil was on course for a strong weekly gain, helped by the US and Iran resuming military exchanges in a conflict now in its seventh month.
The hawkish reaction, which saw rates rise broadly across the curve, reflected the labour market being behind part of the Fed’s mandate, with the full picture dependent on next week’s CPI figures. Fed’s Waller was framed as a proxy for the committee centre, noting a preference for holding steady if the path of disinflation resumes, and that a hike vote is likely to depend on this week’s CPI. USD edged higher on the payrolls data after retreating through Thursday when falling yields reopened a downtrend through most of August, with the move seen more about positioning than a lack of willingness to price in higher rates.
Into next week, the balance of risk leans towards further USD strength unless CPI is soft. The rates move wasn’t sustained, with 5s30s up only 3 bps over the week, suggesting the market continues to seek more concrete signals on the Fed’s policy path, and most attention shifted to next week’s inflation figures.
Let’s get into the guide to trades moving markets, where things stand, and where they may be heading.
“September Showdown”
“Europe Politics”
“Summary of House Views”
Below the paywall, we look into last Friday’s US labour data and how that plays into the September FOMC decision, alongside our call on a hike or hold. We also share some insights on Europe and the political forces at play in local markets, where the stage is set for a bearish impulse on euro-area bonds to emerge ahead of this week’s ECB meeting.
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