Global markets were steady last week, balancing weak US job data, stable eurozone inflation, and rising bond yields.
Gold surged to record highs as investors sought safety amid policy and geopolitical uncertainty.
Key Insights
- US labour market softens: Nonfarm payrolls increased by just 22,000 in August, with unemployment rising to 4.3%, boosting market expectations of a September Fed rate cut to around 86% probability.
- Eurozone inflation steady: Headline inflation ticked up to 2.1% in August, with core inflation stable at 2.3%, while services price growth moderated to 3.1%, keeping ECB policy on hold.
- Equity market performance mixed: US equities broadly flat, with tech stocks up 1.1% (Apple and Alphabet leading gains); UK equities rose 0.25%; Europe flat; Japan +1% following US trade deal implementation; China down 0.8%.
- Government bond volatility: Long-term yields rose sharply in the UK and Japan amid debt concerns; US 10-year Treasury yield climbed to 4.31% midweek before settling at 4.09% on Friday.
- Gold hits new highs: Gold surpassed $3,500/oz, peaking at $3,560, driven by expectations of Fed rate cuts, geopolitical uncertainty, and ongoing central bank buying; up 37% year-to-date.
US Labour Market Weakens
In the United States, the labour market showed clear signs of cooling. Nonfarm payrolls rose by a mere 22,000 in August, far below economists’ expectations of 75,000, while the unemployment rate climbed to 4.3%, its highest level in nearly four years.
The report also highlighted a rare contraction in June payrolls, the first in over four years, underscoring growing concerns about slowing job growth. Economists and market participants largely attributed the softening to policy-related pressures, including tariffs on imports, immigration restrictions, and mass public-sector layoffs.
The weaker employment data immediately lifted expectations of a Federal Reserve interest rate cut at the September 17 meeting, with markets pricing in an 86% chance of a quarter-point reduction and a small, 14% probability of a half-point cut.
Eurozone Inflation Steady
In the eurozone, inflation remained broadly stable. Headline inflation edged up slightly to 2.1% in August, close to the European Central Bank’s 2% medium-term target.
Core inflation, which excludes food, energy, alcohol, and tobacco, remained steady at 2.3%, while services price growth slowed marginally to 3.1% from 3.2% in July.
These figures suggest the ECB may maintain its current policy stance, as underlying price pressures remain contained.
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Equity Market Performance
Equity markets were mixed across regions. In the US, broad indices were largely flat for the week, though technology stocks gained 1.1%, driven by strong performances from Apple and Alphabet.
UK equities eked out a modest 0.25% gain, while European markets ended the week unchanged.
Japanese equities rose nearly 1%, bolstered by the formal implementation of a trade deal with the United States. Conversely, Chinese stocks declined by around 0.8% amid lingering domestic concerns.
Government Bond Volatility
Government bond markets experienced notable volatility. Long-term yields in the UK and Japan rose sharply, reflecting investor unease over sovereign debt risks.
The yield on the 30-year UK gilt reached its highest level since 1998 at midweek, while the US 10-year Treasury yield climbed to 4.31% before retreating to 4.09% by Friday’s close.
Gold Hits New Highs
Meanwhile, gold continued its relentless ascent, surpassing $3,500 per ounce for the first time and reaching $3,560.
The precious metal’s gains were supported by expectations of forthcoming US rate cuts, ongoing central bank buying, a weaker dollar, and geopolitical uncertainty. Year to date, gold has surged 37%, following a 27% gain in 2024.
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