Equity markets started the final quarter of the year slightly on the up as encouraging macroeconomic data led to a sharp fallback in risk aversion. But then came Friday’s US job figures, which dashed all hopes of a hiatus in the Fed’s tightening process.

Bond yields are back at highs after easing considerably. The US 10-year yield was ultimately stable over the week, clocking in at 3.88% after previously ebbing to 3.55%. The US 2/10-year spread remained at around 45 basis points (bp). As we can see, the inflationary outlook is keeping yields high.

In the oil market, following the announcement by OPEC+ that it would be cutting daily output by 2 million barrels, WTI rose from below USD 80 at the end of September to above USD 92. Brent crude oil recovered by nearly USD 10 to trade at USD 98.

Against this backdrop of economic turmoil, the US labour market has started showing signs of slowing down. Initial jobless claims for the week ending 1 October advanced to 219,000, exceeding the forecast 204,000. Further to that, the number of job vacancies at the end of August fell to 10,053,000 from 11,170,000 one month earlier, showing that the slowdown in US economic growth is beginning to impact companies. In contrast, non-farm payrolls (NFP) for September, released on Friday, remained strong at 263,000 versus the 255,000 expected. The addition of 288,000 private-sector jobs was also announced last week versus the 275,000 expected, while the unemployment rate remained at its low of 3.5%. All these figures late last week drove fears that monetary policy will continue in its current shape and form.

The ISM Manufacturing PMI for September clocked in at 50.9 versus the score of 52 expected. The new orders component gave up ground to stand at 47.1 versus the 50.5 expected. The services sector clocked in at a strong 56.7 versus the 56 expected.

In Europe, the manufacturing PMI for September dipped to 48.4 versus the 48.5 expected, as did the services PMI, which stood at 48.8 versus 48.9, amid the energy crisis and the impact on economic activity.

Volatility is expected to remain high in the short term. This week will also be marked by the release of a flurry of US statistics, together with central banker speeches and the release of minutes from the last Fed meeting. For equities, the upcoming US corporate reporting season might provide a little more visibility on the coming quarters.

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