US equity markets bounced back last week, triggered by evident signals of an economic deceleration amid a vibrant jobs market. In stark contrast, European stocks encountered headwinds, beleaguered by the economically tense atmosphere.

In the bond market, yields experienced a modest ascent, with the US 10-year yield ticking up to 4.80% and the yield on the German Bund nudging back toward 2.90%.

Within the US, the manufacturing sector exhibited a more forceful resurgence than expected in September, emphatically recovering from an eleven-month contraction streak. The ISM manufacturing index perceptively lifted to 49.0 from 47.6 the preceding month, reflecting the US economy’s robustness. Additionally, after a dip of 2.1% in July, industrial orders rebounded by 1.2% in August. Several FOMC members, in response to these indicators, intimated that the current era of elevated rates might sustain its course.

Concurrently, the labour market showed job vacancies swelling in August, escalating to 9.61 million and exemplifying enduring tensions. This state of affairs may potentially nudge the Fed towards maintaining interest rates at a restrictive level to mitigate job supply issues.

Nevertheless, the US private sector could only muster the creation of 89,000 new jobs in September – its most languid pace since January 2021 – as per the monthly ADP survey.

Initial jobless claims for the week beginning 25 September rose by less than anticipated, marking 207,000 against the projected 210,000.

Conversely, the US economy generated a significant 336,000 non-farm jobs in September, comfortably surpassing market expectations of 150,000. However, a silver lining was found in the modest slowdown of average hourly earnings to +0.2% in September, correlating to a year-on-year growth of 4.2%, against average projections of +0.3% and +4.3% respectively. The unemployment rate saw a modest uptick, settling at 3.8% against a forecasted 3.7%.

In Europe, following a substantial 11.3% decline in July, German factory orders rebounded by 3.9% in August compared to the previous month in seasonally adjusted terms. Over a three-month period from June to August, these orders increased by 4.9% compared to the preceding three months.

The pervasive deceleration witnessed across the Eurozone economy, conjoined with expected moderations in inflation in upcoming months, might urge the ECB to truncate its monetary tightening process.

In the shadow of these developments, the S&P 500 index concluded the week with a modest 0.48% uptick, while the tech-focused Nasdaq index rebounded by 1.60%. The Stoxx 600 Europe index receded by 1.17%.

Source: Bonhôte

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