By JustMarkets

The US weekly initial jobless claims rose by 2,000 to 207,000, a sign of a resilient labor market versus expectations of 210,000.

Today, market attention will focus on the monthly US Nonfarm Payrolls employment report, which is expected to show a 170,000 increase and a 0.1 decline in the September unemployment rate to 3.7%. A stronger-than-expected reading would indicate a strong and resilient labor market. In turn, this would emphasize the Fed’s stance of “holding rates longer,” and this would directly pressure risk assets such as the euro, pound, stock indices, and even gold. But any hints of a slowing labor market or any unexpected jumps in unemployment will be seen as a negative interest rate impact by the economy, which will weaken the dollar, lower government bond yields, and put confidence back into risk assets, gold, and indices.

Markets are currently pricing in a 22% probability that the FOMC will raise rates by 25 bps at its next meeting on November 1 and a 35% probability that the rate will be raised by 25 bps at its December 13 meeting.

The Canadian dollar rose in September despite the overall strengthening of the US dollar. Given that the Bank of Canada (BoC) left the rate unchanged in early September and expressed concerns about the sustainability of core inflation, it is clear that the Bank of Canada has a desire to keep the possibility of an additional rate hike alive.

Equity markets in Europe traded flat on Thursday. Germany’s DAX (DE40) fell by 0.20%, France’s CAC 40 (FR40) closed around the opening price, Spain’s IBEX 35 (ES35) added 0.67%, and the UK’s FTSE 100 (UK100) closed positive by 0.53%. ECB Vice President de Guindos said yesterday that with inflation still high, it is “premature” to discuss the possibility of cutting interest rates. Economists regard this stance by the ECB as hawkish. German exports fell by 1.2% m/m in August, worse than forecasts of 0.6% m/m. Imports in August also unexpectedly fell by 0.4% m/m vs. expectations of 0.5% m/m growth. Germany’s construction PMI for September fell by 2.2 to 39.3, the sharpest decline since the data series began in 2020. The economic outlook for the Eurozone’s largest economy remains sluggish.

Oil and gasoline prices continued to fall on Thursday, with oil falling to a 5-week low and gasoline falling to a 9-month low. Oil prices have been falling on concerns that slowing global growth will reduce energy demand and consumption. But a weaker dollar on Thursday limited the decline in energy prices. Tension in the oil market is expected to continue as the OPEC+ agreement to cut production is extended. Saudi Arabia recently said it will maintain its unilateral 1.0 million BPD oil production cut through December. The move will keep Saudi oil production at around 9 million BPD, the lowest in three years.

Natural gas prices jumped to an 8-month high on Thursday amid a smaller-than-expected rise in weekly Natural Gas inventories at the EIA. EIA natural gas inventories rose by 86 Bcf, below expectations of 94 Bcf. The natural gas market is also supported by forecasts that cooler temperatures in the US will increase demand for gas for heating. As of October 2, European natural gas storage inventories were 96% full, above the 5-year seasonal average of 88% for this time of year. The US natural gas inventories as of September 29 were 5.3% above the 5-year seasonal average.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) increased by 1.80% on Thursday, China’s FTSE China A50 (CHA50) will not trade for the rest of the week due to holidays, Hong Kong’s Hang Seng (HK50) added 0.10%, and Australia’s ASX200 (AU200) was positive by 0.51%.

S&P 500 (F)(US500) 4,258.19 −5.56 (−0.13%)

Dow Jones (US30) 33,119.57 −9.98 (−0.030%)

DAX (DE40)  15,070.22 −29.70 (−0.20%)

FTSE 100 (UK100) 7,451.54 +39.09 (+0.53%)

USD Index  106.35 −0.45 (−0.42%)

• – Australia Retail Sales (m/m) at 03:30 (GMT+3);
• – Switzerland Unemployment Rate (m/m) at 08:45 (GMT+3);
• – US Nonfarm Payrolls (m/m) at 15:30 (GMT+3);
• – US Unemployment Rate (m/m) at 15:30 (GMT+3);
• – Canada Unemployment Rate (m/m) at 15:30 (GMT+3);
• – US FOMC Member Waller Speaks (m/m) at 19:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.