Good morning, and welcome to the usual morning update on the financial markets. Today is Wednesday, October 4th, and yesterday’s US job report had a significant impact on the financial markets, pushing them further into negative territory, confirming the trend we had already observed in the month of September.
The reason for this negative reaction is attributed to the data that continues to show a robust and healthy US job market, putting pressure on the Federal Reserve (Fed) to maintain high-interest rates in the near future. Furthermore, the number of analysts who consider a rate hike in November as a possibility has grown, in contrast to the previous 16% who believed it was possible. Currently, 28% of analysts consider a rate hike as a valid option.
The report revealed that job openings increased by 700,000 units in August, bringing the total to 9,610,000. Hirings were only 35,000, but this data confirms that there are nearly 10 million available job positions, indicating that the job market remains robust and healthy.
This increased pressure on the Fed has led to higher yields on Treasury bonds. The yield on the ten-year Treasury has risen to 4.80%, the highest level in 16 years, while the yield on the two-year Treasury has exceeded 5.15%. This situation has undermined investor confidence and hopes for a year-end rally.
The Dow Jones has even entered negative territory for the year 2023, losing 1.30% and now registering a 0.04% decline for the current year. The Nasdaq has also experienced a sharp decline, though it remains in positive territory with a modest 1.87% gain. However, the losses recorded in the last month do not bode well for the future.
The market volatility index, known as the VIX, has risen to 19.87%, reaching levels not seen since May. While this level does not suggest panic in the markets, it is an indicator of growing nervousness and pessimism among investors.
We expect to see whether investors will buy during this correction or if October will continue the negative trend from September. The situation remains uncertain, and much will depend on the data to be released on Friday, which will play a significant role in confirming or disproving the state of the US job market. If these data confirm Tuesday’s figures, it is likely that the markets will react negatively. However, if we were to see some positive surprises, the market may rebound in the short to medium term. Stay tuned for further updates.
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