On the evening of October 4, Beijing time, the United States Department of Labor announced that the number of new non-farm payrolls in United States in September exceeded expectations, suppressing the Fed's expectations of a sharp interest rate cut.
The relatively solid performance of the United States job market may help the Fed remain cautious in adjusting interest rate policy. The Fed will hold its next monetary policy meeting on November 6-7. After the September jobs report, CME's Fed Watch showed that the probability of a 25 basis point rate cut by November rose to 97%, and the probability of a 50 basis point rate cut was 2.5%.
For the non-farm payrolls data, United States President Joe Biden said that the non-farm payrolls report brought good news, but there is more work to be done in reducing costs.
After the release of the data, there was a marked fluctuation in overseas assets. The U.S. dollar index rose in a straight line, and the London spot gold dived significantly in the short term; Strong employment data boosted expectations of a soft landing for the United States economy, and the U.S. stock market opened significantly higher, with the Dow rising more than 340 points to a new closing high.
In addition, the Federal Reserve released a report on October 3 local time saying that as of October 2, the Fed's earnings to the Treasury (a measure of its financial performance) have reached -201.2 billion US dollars. However, Fed officials said that the figure reflects a paper loss and will not affect its ability to implement monetary policy. This loss is reflected in what the Fed calls "deferred assets." The Fed has been in the red for two years in a row, and these losses are the result of the Fed's policy of high interest rates to bring down inflation.
The non-farm payrolls data came in better than expected
The pace of interest rate cuts may change
The United States Labor Department reported on Friday that the United States economy added far more jobs than expected in September. Specifically, nonfarm payrolls surged by 254,000 in September, up from a revised 159,000 in August and better than the Dow Jones consensus forecast of 150,000. The unemployment rate fell to 4.1%, the lowest since June 2024, compared to 4.2% previously.
The data showed that the United States unemployment rate fell 0.1 percentage points month-on-month in September, but was still up from 3.8% a year earlier.
United States Non-Farm Payrolls Data Trend (October 2021 to date)
In addition, the report revised upwards the employment data for July and August. Among them, the number of new non-farm jobs in July was revised from 89,000 to 144,000, and the number of new non-farm jobs in August was revised from 142,000 to 159,000. After the revision, the number of new jobs in July and August combined was 72,000 higher than before the revision.
The strong momentum of job creation spilled over into wages, with average hourly earnings rising 0.4% month-on-month and 4% year-on-year. Both figures were higher than expectations of 0.3% and 3.8%.
Gene Goldman, chief investment officer at Cetera Investment Management, said: "The non-farm payrolls numbers are staggering. The results far exceeded expectations. The unemployment rate is falling, which indicates a strong economy. "Today's news confirms that the fundamentals of the economy are solid. I'm cautious about the initial move in equities today as the dollar is strengthening and bond yields are moving higher. ”
The price level and employment conditions are the two main factors that the Fed considers in monetary policy, and good employment data may affect the pace of the Fed's interest rate cuts.
Following the jobs data, traders lowered their expectations for a 50 basis point rate cut in November, further betting that the Fed will cut rates by 25 basis points each in November and December, and expect the cumulative rate cuts at the Fed's next four meetings to be less than 100 basis points.
Swap market pricing shows traders expect only 27 basis points of rate cuts by the end of November and 55 basis points by the end of the year. That's a sharp drop from bets that were expected to cut rates by 66 basis points for the rest of the year before the data.
According to Securities Times, Nick Timiraos, the "New Fed News Agency", said that the United States non-farm payrolls report for September may close the door for the FOMC to cut interest rates by 50 basis points in November, explaining that the rate cut may be only 25 basis points.
Analyst Audrey said the just-released jobs data once again reminded investors that the market is underestimating the United States economy. This is a convincingly strong report that could put the recent talk of a recession on hold for now, which will strengthen the dollar's strong momentum in recent days. Analyst Nour also believes that the dollar's rally could be extended further after the release of shocking employment data United States.
On October 3, local time, Chicago Federal Chairman Ostan · Goolsbee stressed in an interview that the Fed's attention has expanded from focusing on inflation to the job market, adding that he hopes to avoid further increases in the unemployment rate.
Goolsbee said United States benchmark interest rates would need to be cut "substantially" in the coming year. But after the release of the non-farm payrolls data, Fitch Ratings chief economist Brian · Kurton said the Fed's concerns about the labor market were clearly overblown.
After the release of the data, there was a marked fluctuation in overseas assets.
The yield on the 10-year United States Treasury rose to 3.961%, and the yield on the two-year United States Treasury rose to 3.918%.
Spot gold and COMEX gold both fell sharply in the short term, but then gradually pared their losses.
The U.S. dollar index surged and rushed above the 102 mark.
The Dow Innovation High School Concept Stock Golden Dragon Index rose nearly 12% for the week
Boosted by United States employment data, on October 4, local time, the three major US stock indexes collectively closed higher. At the close, the Dow Jones rose 0.81% to 42,352.75, extending its all-time high, the S&P 500 rose 0.90% to 5,751.07, and the Nasdaq Composite rose 1.22% to 18,137.85.
U.S. stocks and Chinese concept stocks performed well. The Nasdaq China Golden Dragon Index rose 3.05% and rose 11.85% for the week. The "China Dragon" ETF rose more than 3% at the beginning of the session, and both indexes outperformed the U.S. stock market at the beginning of the session.
Most of the popular Chinese concept stocks closed higher, Zhihu rose 12.94%, Huya rose 10.27%, Weibo rose 9.91%, MINISO rose 8.76%, Ctrip rose 5.88%, JD.com rose 5.31%, Futu Holdings rose 4.23%, Xiaopeng Motors rose 3.31%, New Oriental rose 1.97%, Li Auto rose 1.61%, Alibaba rose 1.50%, Baidu rose 1.13%, Pinduoduo rose 1.08%, NIO rose 1.04%, and Good Future rose 0.97%.
Tencent Music fell 0.22%; Fang Duoduo fell 32.89%, but rose 100.79% this week.
According to analysts, the attractiveness of Chinese assets continues to grow. Bank of United States, citing EPFR Global data, said global emerging market equity funds saw $15.5 billion in inflows in the week ended Oct. 3, the second-highest on record. China's stock market saw $13.9 billion in inflows for the week, also the second-highest on record.
Over the past 18 weeks, emerging market equity funds have seen uninterrupted inflows. Since the beginning of this year, the inflow of funds into the Chinese stock market has reached 114 billion US dollars, and the inflow into the India stock market has reached 21.3 billion US dollars.
The Fed's paper losses exceeded the $200 billion mark
The Federal Reserve reported on Thursday that its losses had crossed the $200 billion mark, according to Securities Times. As of Wednesday, the Fed's earnings to the Treasury, a measure of its financial performance, had reached -$201.2 billion. However, Fed officials stressed that this indicator does not affect the implementation of the Fed's monetary policy.
It is reported that the indicator, called "Earnings Remittances Due to the U.S. Treasury", is published weekly. According to data released on Wednesday, the indicator was -201.237 billion US dollars, a new low since the data was recorded.
The loss stems from the interest paid by the Federal Reserve to major financial institutions during the current interest rate hike cycle. In order to keep short-term interest rates at target levels, the Fed needs to pay compensation to banks and money market funds for margin deposits held with the central bank. The cost of this interest rate management has exceeded the interest income generated by the Fed's holding of bonds.
At the beginning of 2022, in order to curb persistently high inflation, the Federal Reserve began to raise interest rates, raising the benchmark interest rate from near zero to a range of 5.25% to 5.5%. In March, the Federal Reserve disclosed a paper loss of $114.3 billion last year. Of that amount, the Fed paid about $176.8 billion to banks and $104.3 billion through reverse repo facilities, while earning $163.8 billion from bond interest.
The Fed derives its income from the services it provides to banks and the interest it holds on its bonds. By law, the Fed must turn profits over to the United States Treasury. According to research by the Federal Reserve Bank of St. Louis, from 2011 to 2021, the Fed handed over nearly $1 trillion to the United States Treasury.
But Fed officials stressed that this indicator reflects paper losses and will not affect its ability to implement monetary policy.
Disclaimer: The content and data of the article are for reference only and do not constitute investment advice. Investors act accordingly at their own risk.
Edit|||Cheng Peng: Cover the source
Proofreading|Liu Xiaoying
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