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LGT Navigator: Hoping for a weak US jobs report?

October 7, 2022

Before this afternoon's upcoming monthly labor market report from Washington, most investors exercised restraint after the strong movements in the first half of the week. The Federal Reserve is strongly oriented in its monetary policy to the development of the labor market and continued robust job growth would justify further interest rate hikes. Therefore, bulls on the stock market are likely to some extent hoping for a weaker-than-expected labor market report, which could move the Fed to a possibly more moderate course. Given the inflation trend, this seems a very vague hope.

Hoping for a weak US jobs report?

Analysts' average estimate is that the overall US economy (excluding the agricultural sector) added 250'000 jobs in September. However, this would have meant that employment growth slowed considerably compared with the previous month. In August, the first calculation reported an increase of 315'000 jobs.

Inflation fears and rising yields put stock markets under pressure again

On Wall Street, stock indices again came under pressure on Thursday. Rising oil prices following the Opec+ production cut, which was sharply criticized by the US, and the prospect of a possibly continuing solid US labor market point to an unchanged pace of the Fed's interest rate policy. Recent statements by Federal Reserve officials reinforced this assumption. The fight against inflation seems far from being won. The Dow Jones Industrial fell -1.15% to 29'926.94 points and the broad S&P 500 fell -1.02% to 3'744.52 points. On the Nasdaq, the indices closed about -0.75% lower than the day before. In the bond market, the yield of ten-year US government bonds climbed to 3.82%, back towards the 4% mark.

Stock markets in the Asia-Pacific region weakened at the end of the week ahead of the US labor market report. In Tokyo, the Nikkei 225 trades around -0.6% lower and in Hong Kong, the Hang Seng index fell -1.1%, with the Hang Seng Tech index losing around -2.8%. MSCI's index of Asia-Pacific equities outside Japan was down around -1%. China's stock markets also remained closed on Friday for the “Golden Week” holiday.

ECB minutes reiterate need for further rate hikes

The Governing Council of the ECB, on the last monetary policy direction decision on September 8, feared that the rapid rise in inflation in the euro area could become entrenched. Inflation was far too high and likely to remain above the Governing Council's target for an extended period, the ECB noted in its minutes published yesterday. As a result, the ECB had raised key interest rates sharply by 75 basis points. It said the expected slowdown in economic activity would not be enough to bring inflation down significantly, which would have to result in further interest rate steps. The ECB's next interest rate decision is scheduled for October 27.

Economic Indicators October 7

MEZ Country Indicator Last period
07:45 SZ Unemployment Rate (September) 2.1%
08:00 GE Import Prices (August, y/y) +28.9%
08:00 GE Retail Sales (August, m/m) +1.9%
12:00 EZ EU State and Government heads meeting
14:30 US Unemployment Rate (September) 3.7%
14:30 US Non-Farm Payrolls (September)  +315,000
14:30 US Average Hourly Earnings (September, m/m) +0.3%


Earnings Calender October 10

Country Company Period
AUT OMV Q3 Sales
ES Repsol Q3 Sales


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