Market Perspectives
Payrolls came in at 162,000 against a consensus of 53,000, July's job losses were revised away and unemployment held at 4.1%. That took the September hike from a possibility to the base case, with futures assigning barely one chance in seven to rates being unchanged by December and roughly two increases priced by March 2027. US equities finished narrowly mixed: the S&P 500 was little changed at 7,718.60, the Nasdaq gained 0.40% and the Dow fell 0.27%. Europe was weaker, with the STOXX Europe 600 down 0.81% to 649.88, the DAX off 1.97%, the CAC 40 1.46% and the FTSE MIB 0.98%, while the FTSE 100 finished broadly unchanged. Asia was mixed, Japan's Nikkei 225 falling 2.09% on rising JGB yields and Hong Kong's Hang Seng edging 0.26% higher. Underneath it, the US struck Iranian oil tankers for the first time and crude jumped almost 10% to $91.48, which makes Friday's inflation report the most consequential release of the month.
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BONDS & MACROECONOMICS
Treasury yields sold off sharply before retracing after Governor Waller said he would favour holding if the data confirm disinflation is on track. The 10-year briefly reached 4.82% and closed at 4.78%. Markets lifted the probability of a September Fed hike to around 60% and assigned just 14% to rates being unchanged through December, with roughly two increases priced by March 2027. Despite 175 basis points of easing since September 2024, the yield advantage of bonds over equities has widened from about minus 20 basis points to more than a full point.
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