Fears of inflation, the oil rally continues, huge miss NFP

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The kick-off was risky on Monday with the plunge in global stocks following the suspension of trading in heavily indebted China Evergrande stocks. Concerns about rising inflation and the stalling of negotiations in Congress contributed to the cautious mood, causing global equities to fall. In the area of ​​raw materials, oil prices have recovered after OPEC + decided to increase production more than expected.

Our trade of the week for none other than gold. We wondered if the precious metal knew a calm before the NFP storm. After experiencing its biggest monthly loss since June in September, gold first entered the new month on a choppy note thanks to conflicting themes. After hovering between losses and gains for most of the week, gold saw an explosive explosion in volatility on Friday following the disappointing report from the NFP. Prices climbed to $ 1,791 before dropping back below $ 1,760.

Speaking of commodities, oil prices hit multi-year highs after OPEC + decided not to increase production despite calls from world leaders to pump more. While rising oil prices may be good for OPEC +, it puts many energy consumers at risk, especially those who already face high inflation.

On Tuesday, markets were gripped by inflation fears. Soaring oil prices have fueled concerns about global inflation. Midweek, our technical outlook focused on the dollar ahead of the US jobs report. Attention was also drawn to the September national ADP employment report which exceeded market expectations. Private sector employment increased by 568,000 jobs last month, up from 374,000 in August and well above 428,000 market expectations. Although this is not a good predictor of the overall non-farm payroll figure, it is considered a very rough indicator of the labor market situation.

Interestingly, the risky mood returned on Thursday as progress in the US debt ceiling negotiations boosted global sentiment. The positive sentiment was also helped by Russia’s offer to stabilize global energy markets. As the US jobs report looms, the question on the minds of many investors is whether this report will pass the Fed’s test of decline. Recently, Fed Chairman Jerome Powell said additional job gains in September would give policymakers the green light to start shrinking in November.

Well…. the US jobs report was another big failure. The US economy created just 194,000 jobs in September, well below the 500,000 forecast, while August’s figures were revised up to 366,000 from 248,000. As for the unemployment rate, it declined. declined for the third consecutive month, from 5.2% to 4.8%. Average hourly wages rose 0.6%, exceeding expectations. Overall, job growth in September was the weakest this year, as the Delta variant of the Covid-19 threat negatively impacted the economy.

The key question is whether this lukewarm jobs data will be enough to keep the Federal Reserve from shrinking next month? Time will tell us.

Through Lukman Otunuga Senior Research Analyst

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