Cooling Labor Market Boosts Stocks
Weak U.S. Jobs Report Boosts Stocks and Eases Federal Reserve Rate Fears
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Key Points
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The CME FedWatch tool put the chance of the Federal Reserve holding rates steady in October at 80%, up from 76% the previous day and 36% a week earlier.
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Despite Friday’s gains, London’s FTSE 100 was down 2.2% for the week and the FTSE 250 was down 0.3%; the AIM All-Share ended the week slightly higher.
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A planned release of as many as 100 million barrels of diesel and crude by G7 nations and partners, alongside falling oil prices, also supported risk sentiment.
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The unemployment rate’s rise to 4.2% was partly attributed to a growing workforce, while it remained historically low—allowing Fed officials to keep inflation in focus as they weigh future rate decisions.
U.S. stocks climbed Friday after a weak September jobs report eased fears of more interest rate hikes. Employers added just 29,000 jobs, well below the expected 90,000, while unemployment ticked up to 4.2% Morning Chronicle. The softer data convinced investors the Federal Reserve will hold rates steady in October instead of raising them again.
London's FTSE 100 rose 0.3% to 10,461.95 points, and U.S. indices also gained as traders bet on a more patient Fed MarketScreener. The CME FedWatch tool showed an 80% chance of steady rates in October, up from 76% the day before. Falling oil prices and planned G7 diesel releases added to the relief.
Soft Jobs Report Shifts Rate Expectations
September's employment gain of 29,000 jobs shocked economists who forecast around 90,000 Morning Chronicle. The miss came alongside downward revisions to July and August hiring numbers, suggesting the labor market is losing momentum. Wage growth also slowed, signaling less wage pressure pushing up inflation.
Before Friday's report, investors feared the Fed would raise rates in October. The CME FedWatch tool now puts the chance of holding steady at 80%, up sharply from just 36% a week earlier MarketScreener. A softer labor market gives Fed officials room to pause rate hikes while monitoring inflation.
London Markets Rally on Eased Rate Fears
The FTSE 100 rose 0.3% to 10,461.95 points Friday as U.K. investors cheered the U.S. jobs news MarketScreener. Despite the daily gain, the index fell 2.2% for the full week. The FTSE 250 also edged higher, while the AIM All-Share finished the week slightly positive.
Weaker U.S. employment data reduces the chance of aggressive rate hikes spreading to other major central banks. Lower U.S. rates would support global growth and corporate profits, making international stocks more attractive to investors worldwide.
Oil Release and Falling Prices Support Risk Assets
The G7 and partner nations plan to release as many as 100 million barrels of crude and diesel onto the market Morning Chronicle. This move, combined with already falling oil prices, eased inflation worries and boosted investor appetite for riskier assets like stocks. Lower energy costs help keep inflation pressures contained, supporting the Fed's case for pausing rate increases.
Labor Market Still Strong Despite Job Slowdown
The unemployment rate rose to 4.2% in September, but much of the increase came from a growing workforce entering the job market Morning Chronicle. By historical standards, 4.2% joblessness remains quite low, giving the Fed flexibility to focus on inflation rather than employment. This split view lets policymakers avoid rushing into more rate hikes.
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