Markets breathe easier as US jobs market cools and rate fears recede

Susannah Streeter, chief investment strategist at Wealth Club, said: “There’s been a ripple of relief on financial markets as hopes rise that the Fed won’t have to go so hard and fast in raising interest rates. Treasury and gilt yields have eased off, and equity markets are on a rising tide, as the rush of worry has started to recede.

“The latest US jobs figures came in weaker than expected, with just 29,000 jobs added in September, compared with forecasts of around 90,000. That’s a marked slowdown, although some of the weakness reflects a fall in government payrolls. But pay packets indicate that employees don’t have the upper hand in demanding higher wages, with hourly earnings rising by just 0.1 per cent over the month, taking annual wage growth down to three per cent, its lowest rate since the pandemic.

“The figures suggest the jobs engine is losing a little steam, but isn’t spluttering to a halt, so the snapshot has been greeted as a dose of better news and a sign that the Fed may be a tad more wary about hiking borrowing costs. Rather than a rapid succession of rate rises, chances are increasing for a more measured path ahead, closer to the prospect of two further increases.

“This has eased the jolt of deep unease which had hit bond markets this week over the prospects of inflation bedding in and prompting a rapid hiking cycle. The S&P 500 has risen in early trade, and the FTSE 100 has hung onto positive territory. But given that energy prices remain elevated, with Brent Crude close to $100 a barrel, there is still a huge amount of uncertainty around, and investors are set to stay twitchy until a long-term resolution to the Iran conflict can be agreed.”