Gold set for fourth weekly rise as US data lifts rate-cut hopes

Gold prices rose on Friday and were headed for a fourth consecutive weekly gain, as fears of a weakening US labor market eclipsed inflation concerns ahead of an expected Federal Reserve rate cut next week.

FUNDAMENTALS

* Spot gold rose 0.1% to USD 3,637.06 per ounce as of 0059 GMT. Bullion gained 1.4% so far this week.

* US gold futures for December delivery were steady at USD 3,674.20.

* US consumer prices rose 0.4% in August, the steepest monthly rise in seven months, driven by higher housing and food costs, while data on Wednesday showed an unexpected decline in US producer prices in August.

* Weekly jobless claims surged last week, underscoring a material softening in labour market conditions after the US government said nonfarm payrolls may have been overstated by 911,000 jobs in the 12 months through March.

* This followed Friday’s employment report, which showed job growth nearly stalled in August.

* The Fed is expected to lower its key interest rate by 25 basis points on September 17 as labour market softness overshadows inflation risks, said almost all 107 economists in a Reuters poll, with most expecting another cut next quarter.

* US 10-year Treasury yields hovered near 4-month lows, while the US dollar index was headed for a weekly decline.

* Greenback-priced bullion, which hit a record high of USD 3,673.95 on Tuesday, is often considered a hedge against inflation and uncertainties and tends to perform well in a low-interest-rate environment.

* Meanwhile, US President Donald Trump’s administration on Thursday asked a federal appeals court to allow Trump to remove Fed Governor Lisa Cook from office for now after a judge said he likely lacked cause to do so.

* Elsewhere, spot silver fell 0.2% to USD 41.48 per ounce, platinum steadied at USD 1,378.40 and palladium held ground at USD 1,188.34. All three metals were set for a weekly rise.

DATA/EVENTS (GMT)
0600	Germany HICP Final YY August
0600	UK GDP Est 3M/3M July
0600	UK GDP Estimate MM, YY July
0600	UK Services MM, YY July
0600	UK Manufacturing Output MM July
0645	France CPI (EU Norm) Final MM, YY August
0645	France CPI MM, YY NSA August
1400	US U Mich Sentiment Prelim September

(Reporting by Anmol Choubey in Bengaluru; Editing by Sumana Nandy)

Wall Street indexes post record-high closes; Tesla and Micron rally

Wall Street’s main indexes notched record-high closes on Thursday following gains in Tesla and Micron Technology, while US inflation and jobless data fueled expectations that the Federal Reserve will cut interest rates this month.

US consumer prices rose more than expected in August and the annual increase in inflation was the largest in seven months.

In a separate reading, initial jobless claims for the week ended September 6 stood at 263,000, at a near four-year high.

“Inflation has been sticky … Whether we would call it stagflation or not, people have different definitions of it. But certainly we are in a period that is unusual relative to the last several years, as the job market is slowing down considerably while inflation does not follow suit,” said Atsi Sheth, Chief Credit Officer at Moody’s Ratings in New York.

Sheth predicted the Fed will reduce interest rates by 25 basis points next week, and another 25 basis points by year-end.

Futures trading indicates traders are certain the Fed will cut rates by at least 25 basis points at its policy meeting next week, with about a 7% chance of a deeper 50 basis point cut.

That follows a series of bleak labor market datasets and Wednesday’s cooler-than-expected producer inflation reading.

Tesla climbed 6% and helped the S&P 500 and Nasdaq hit record highs.

The Dow Jones Industrial Average closed at a record high, with gains of more than 1% in JPMorgan, and Goldman Sachs Group.

Micron Technology jumped 7.5% to USD 150.55 after Citigroup raised its price target on the memory chipmaker to USD 175 from USD 150. The Philadelphia SE Semiconductor Index rose 0.9%, also hitting an all-time high.

Warner Bros Discovery surged 29% after the Wall Street Journal reported that Paramount Skydance is preparing a majority cash bid for the struggling media company.

The S&P 500 climbed 0.85% to end the session at 6,587.47 points.

The Nasdaq gained 0.72% to 22,043.08 points, while the Dow rose 1.36% to 46,108.00 points.

Ten of the 11 S&P 500 sector indexes rose, led by materials, up 2.14%, followed by a 1.73% gain in health care.

Centene jumped 9% after the health insurer reaffirmed its annual profit forecast and said quality ratings for its Medicare plans were in line with expectations.

Oracle receded 6.2%, giving back some of the prior session’s 36% surge, which had added new fuel to Wall Street’s AI rally.

Delta Airlines fell 1.55% after the carrier reaffirmed its annual profit forecast.

Advancing issues outnumbered falling ones within the S&P 500 by a 6.8-to-one ratio.

The S&P 500 posted 42 new highs and 4 new lows; the Nasdaq recorded 143 new highs and 42 new lows.

Volume on US exchanges was heavy, with 18.2 billion shares traded, compared to an average of 16.1 billion shares over the previous 20 sessions.

(Reporting by Purvi Agarwal and Shashwat Chauhan in Bengaluru, and by Noel Randewich in San Francisco; Editing by Pooja Desai and Maju Samuel. Additional reporting by Davide Barbuscia in New York; Editing by David Gregorio)

Dollar steady as inflation data and central banks take focus

SINGAPORE – The dollar stabilised in early Asian trading hours on Thursday after an unexpected drop in US factory-gate prices bolstered expectations the Federal Reserve will cut rates next week, and traders awaited US consumer price data due later in the day.

The dollar index nudged upwards to 97.822, rising for a third consecutive day after the Producer Price Index for final demand fell 0.1% during August, the Labor Department’s Bureau of Labor Statistics said on Wednesday. The decline followed a 0.7% jump in July, which was also revised downwards.

“The market has positioned for the Fed to ease in September and potentially ease three times this year,” said Rodrigo Catril, currency strategist at National Australia Bank in Sydney. “The benign outcome from the PPI tells you pricing expectations look about right.”

Markets are trading on expectations that the prospect of the Fed easing is a certainty and the only remaining question is by how much. Traders are pricing in an 8% chance of a jumbo 50 basis points (bps) rate cut at the central bank’s September meeting, while a cut of at least 25 bps is viewed as a done deal, according to the CME Group’s FedWatch tool.

Appointments to the Fed’s rate-setting panel remained in focus, as President Donald Trump’s administration on Wednesday moved to appeal a federal judge’s ruling temporarily blocking Trump from taking the unprecedented step of firing Federal Reserve Governor Lisa Cook. The White House is seeking to remove her before the US central bank’s interest-rate-setting meeting next week.

Stephen Miran also moved closer to becoming a Federal Reserve governor, furthering Trump’s effort to exert more direct control over interest rate policy. The Senate Banking Committee voted to advance Miran’s nomination, though lawmakers involved said it is far from certain if the process can be completed in time for him to participate in the Fed’s September 16-17 policy meeting.

Against the yen, the dollar was trading flat at 147.41 yen, after data showing Japanese wholesale prices rose 2.7% in the year to August, accelerating from the previous month in a sign of sticky inflationary pressure in the world’s fourth-largest economy.

The euro edged upwards to USD 1.1698 EUR=EBS ahead of the European Central Bank’s policy meeting later on Thursday, where it is widely expected to keep rates on hold. Analysts said policymakers may strike a more dovish tone to counter a fraught trade and political outlook across the continent.

The single currency is recovering from a two-day streak of declines as geopolitical tensions continue on the bloc’s Eastern flank. Poland said it shot down suspected Russian drones in its airspace on Wednesday with the backing of aircraft from its NATO allies, the first time a member of the Western military alliance is known to have fired shots during Russia’s war in Ukraine.

The Australian dollar fetched USD 0.66165, up 0.04% in early trade after hitting the highest levels since November on Wednesday, buoyed by advances for commodities including iron ore, crude oil, and gold, which is near record highs.

The offshore yuan traded at 7.1184 yuan per dollar, strengthening 0.03% in early Asian trade. The kiwi slipped 0.03% to USD 0.59375.

Sterling traded at USD 1.3527, unchanged so far on the day.

(Reporting by Gregor Stuart Hunter; Editing by Jamie Freed)

S&P 500 and Nasdaq notch record-high closes as Oracle soars on AI optimism

The S&P 500 and Nasdaq notched record-high closes on Wednesday, as Oracle surged and cooler-than-expected inflation data supported expectations the US Federal Reserve will cut interest rates next week.

Oracle soared 36% in its biggest one-day percentage gain since 1992 after the tech company pointed to a demand surge from AI firms for its cloud services.

Its stock market value reached USD 922 billion, leapfrogging the values of Eli Lilly, JPMorgan Chase, and Walmart, and approaching Tesla’s USD 1.12 trillion market value.

Artificial intelligence-related chip stocks also rallied, with Nvidia up 3.8%, Broadcom jumping 10% and Advanced Micro Devices climbing 2.4%. The PHLX chip index rose 2.3% to a record high.

Data center power suppliers also benefited, with Constellation Energy, Vistra, and GE Vernova all rising more than 6%.

Apple, viewed by many investors as lagging in the race to dominate AI, declined 3.2%, sliding for a fourth straight session.

A cooler-than-expected producer prices reading provided additional momentum as traders shored up their bets on interest-rate cuts this year.

Recent labor market data has confirmed that the US jobs market is in a slowdown.

Traders fully expect the Fed to cut interest rates by at least 25 basis points at its policy meeting next week, with a 10% chance the central bank could cut by 50 basis points, CME’s FedWatch tool showed.

The S&P 500 has now climbed about 11% in 2025, while the Nasdaq has rallied about 13%.

“The fundamentals remain very strong in the equity markets, domestically. But we also have to acknowledge that valuations are extended at this point and serve as some natural tension to a continued upward trajectory,” said Bill Northey, senior investment director at US Bank Wealth Management in Billings, Montana.

The S&P 500 climbed 0.30% to end the session at 6,532.04 points, closing with a record high for the second straight day.

The Nasdaq gained 0.03% to 21,886.06 points for its third consecutive record-high close. The Dow Jones Industrial Average declined 0.48% to 45,490.92 points.

Six of the 11 S&P 500 sector indexes declined, led lower by consumer discretionary, down 1.58%, followed by a 1.06% loss in consumer staples.

Investors will now focus on consumer prices data due on Thursday, for insights on where US inflation is headed.

“Combining the softer data (PPI figures) with the Fed’s increased emphasis on the labor market side and the growing trend we’ve seen in downward revisions to the monthly employment data – all support the expectation for a rate cut,” said Jordan Rizzuto, CIO at GammaRoad Capital Partners.

In a setback for the White House, a federal judge on Tuesday temporarily blocked US President Donald Trump from removing Fed Governor Lisa Cook.

Barclays and Deutsche Bank raised their year-end targets for the S&P 500, citing stronger corporate earnings, resilient US economic growth and optimism around artificial intelligence.

Synopsys tumbled 36% in its biggest one-day decline on record after the chip design software provider missed Wall Street estimates for quarterly revenue. Rival Cadence Design Systems fell 6.4%.

Declining stocks outnumbered rising ones within the S&P 500 by a 1.5-to-one ratio.

The S&P 500 posted 19 new highs and 8 new lows; the Nasdaq recorded 112 new highs and 72 new lows.

Volume on US exchanges was relatively heavy, with 17.2 billion shares traded, compared with an average of 16.0 billion shares over the previous 20 sessions.

(Reporting by Purvi Agarwal and Ragini Mathur in Bengaluru, and by Noel Randewich in San Francisco; Editing by Pooja Desai and Matthew Lewis)

Gold prices trade above USD 3,600 on Fed rate-cut bets

Gold prices hovered near a record high on Tuesday, holding firm above the USD 3,600 level, as growing expectations for a US Federal Reserve interest rate cut this month lifted demand for the precious metal.

FUNDAMENTALS

* Spot gold was up 0.1% at USD 3,640.41 per ounce, as of 0103 GMT. Bullion rose to a record high of USD 3,646.29 on Monday.

* US gold futures for December delivery edged 0.1% higher to USD 3,682.

* US job growth weakened sharply in August and the unemployment rate increased to a nearly four-year high of 4.3%, confirming that labor market conditions were softening and sealing the case for a Fed rate cut next week.

* Traders are pricing in an 89.4% chance of a 25-basis-point rate cut at the Fed’s September meeting and a 10.6% probability of a jumbo 50-basis-point rate cut, according to the CME Group’s FedWatch tool.

* Lower US interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.

* The dollar index fell to an almost seven-week low against its rivals, making gold more attractive for other currency holders, while the benchmark US 10-year yield dropped to a five-month low.

* Meanwhile, the European Central Bank is widely expected to hold rates at its policy meeting on Thursday.

* Investors are now awaiting US producer price data on Wednesday and consumer prices on Thursday for further clues on the Fed’s policy path.

* Gold prices have gained 38% so far this year, following a 27% jump in 2024, bolstered by soft dollar, strong central bank accumulation, dovish monetary settings and heightened global uncertainty.

* SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.23% to 979.68 tons on Monday from 981.97 tons on Friday

* Elsewhere, spot silver was flat at USD 41.31 per ounce. Platinum gained 0.3% to USD 1,387.20 and palladium climbed 0.8% to USD 1,142.64.

(Reporting by Brijesh Patel in Bengaluru; Editing by Sherry Jacob-Phillips)

Dollar falls hits 7-week low as jobs gloom heightens Fed cut chances

The dollar sank to an almost seven-week low on Tuesday as investors braced for US data revisions that could show the jobs markets in worse shape than initially thought, shoring up the case for even deeper Federal Reserve interest rate cuts.

The dollar index fell to the lowest since July 24 in Asia trade to 97.344 ahead of the release of preliminary benchmark revisions for jobs data covering the period from April 2024 to March 2025. Economists anticipate a downward revision of as much as 800,000 jobs, which could signal that the Federal Reserve is behind the curve in efforts to achieve maximum employment.

“The employment numbers are getting worse and worse at a heavy rate,” said Alex Hill, managing director at Electus Financial in Auckland. “That’s translating into a weaker US dollar slowly, but we expect that to accelerate.”

Advisors to the Trump administration are preparing a report laying out the alleged shortcomings of the Bureau of Labor Statistics, which they may publish in coming weeks, The Wall Street Journal reported on Tuesday, citing unnamed sources.

Last month US President Donald Trump fired BLS Commissioner Erika McEntarfer, accusing her, without evidence, of faking the employment data.

US bond investors say they are seeing cracks emerging in the outlook, warning the market is underpricing long-term fiscal risks and the danger posed by White House pressure on the central bank to cut interest rates.

Traders are pricing in an 89.4% chance of a 25 basis point rate cut at the Fed’s September meeting and a 10.6% probability of a jumbo 50 basis point rate cut, according to the CME Group’s FedWatch tool.

Gold hovered not far from record highs, up 0.1% at USD 3,636.58.

The euro edged higher to USD 1.1774, just shy of the highest level since July 28 and up 0.1% so far in Asia. Its appreciation was restrained as France’s parliament brought down the government on Monday over plans to tame ballooning national debt, deepening a political crisis that is weakening the euro zone’s second-largest economy.

The European Central Bank is widely expected to hold rates at its policy meeting on Thursday.

The yen strengthened against the dollar, reversing weakness from Monday after prime minister Shigeru Ishiba resigned. The currency was 0.2% stronger at 147.22 yen and speculation turned to who could succeed him.

The Australian dollar fetched USD 0.6598, up 0.1% in early trade, while the kiwi traded 0.1% higher at USD 0.5943.

The offshore yuan traded flat at 7.1212 yuan per dollar, while sterling traded at USD 1.3556, up 0.1% so far on the day.

(Reporting by Gregor Stuart Hunter; Editing by Sam Holmes)

Nasdaq notches record high close; traders focus on rate cuts

The Nasdaq notched a record high close on Monday, lifted by a rally in Broadcom, while the S&P 500 also gained as investors bet the Federal Reserve will soon lower borrowing costs to shore up economic growth.

Investors expect multiple interest rate cuts this year after a troubling nonfarm payrolls report on Friday added to concerns about a weakening US job market. The report, which had dragged down Wall Street in the previous session, has stoked fears of a potential slowdown in the world’s biggest economy.

Traders have fully priced in at least a 25 basis point interest rate cut when the Fed wraps up its two-day policy meeting on September 17, with interest rate futures reflecting a 10% chance of a 50 basis point cut, according to CME Group’s FedWatch tool.

“The focus is on next Wednesday’s Fed rate cut. The market is greedy. It’s already discounted 25 basis points. Now, if people are buying because they expect 50, well, that’s not going to happen,” warned Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

Numerous brokerages have revised calls for Fed interest rate cuts. Barclays now anticipates three cuts of 25 bps each in 2025 compared with two earlier, while Standard Chartered expects a 50-bps trim in September – double its earlier projection.

Broadcom climbed 3.2%, extending its rally since the chipmaker said last Thursday it expects sharp artificial intelligence-related revenue growth. Its market capitalization has reached USD 1.6 trillion, and it is Wall Street’s seventh most valuable company.

The S&P 500 climbed 0.21% to end at 6,495.15 points.

The Nasdaq gained 0.45% to 21,798.70 points, its highest close ever. The Dow Jones Industrial Average rose 0.25% to 45,514.95 points.

The S&P 500 is up about 10% so far in 2025, and the Nasdaq has climbed about 13%.

Six of the 11 S&P 500 sector indexes declined, led by utilities, down 1.07%. The S&P 500 technology index rose 0.67%.

This week, investors will keep a close watch on inflation data and the Bureau of Labor Statistics’ benchmark payroll revision for further clues on the US economic health and to see if they could strengthen the case for a bigger rate cut.

“The growth scare from the labor market is going to overwhelm even hot inflation because the Fed right now is viewing any tariff-induced inflation as a one-time price increase,” said Jeff Schulze, head of economic and market strategy at Clearbridge Investments.

Among other stocks, retail trading platform Robinhood Markets jumped 16% and marketing platform AppLovin soared 12%, with the two companies set to join the S&P 500, effective September 22.

EchoStar rallied 20% after the telecommunications services firm agreed to sell wireless spectrum licenses to SpaceX for its Starlink satellite network for about USD 17 billion.

Other telecommunications companies fell, with AT&T and Verizon both down more than 2% and T-Mobile losing almost 4%.

Declining stocks outnumbered rising ones within the S&P 500 by a 1.0-to-one ratio.

The S&P 500 posted 18 new highs and eight new lows; the Nasdaq recorded 136 new highs and 95 new lows.

Volume on US exchanges was relatively heavy, with 16.2 billion shares traded, compared to an average of 16.1 billion shares over the previous 20 sessions.

(Reporting by Purvi Agarwal and Ragini Mathur in Bengaluru, and by Noel Randewich in San Francisco; Editing by Pooja Desai, Shinjini Ganguli and Richard Chang)

Japan stocks surge, bonds hold steady after PM Ishiba’s exit

TOKYO – Japan’s stocks surged, the yen weakened, and bonds stood firm on Monday after Prime Minister Shigeru Ishiba’s resignation stoked speculation that his successor will raise government spending.

The Nikkei 225 index gained 1.7% to 43,740.15, while the broader Topix rose 1% to a record high. The yen softened 0.7% to 148.46 versus the US dollar.

The benchmark 10-year Japanese government bond (JGB) yield rose 0.5 basis point (bp) to 1.575%. The five-year yield slid 0.5 bp to 1.1%.

Yields on super-long JGBs hovered near record highs due to global concerns about fiscal deficits and as pressure mounted on Ishiba from within his Liberal Democratic Party (LDP), while the Nikkei recently slipped from last month’s record high.

Among top contenders in the LDP leadership race is Sanae Takaichi, a devotee of “Abenomics” policies of Shinzo Abe – Japan’s long-time leader and former PM, who presided over massive stimulus and unprecedented monetary easing.

“Sanae Takaichi, who is considered to have a strong expansionary fiscal bias, could be perceived as more positive for Japanese equities,” Morgan Stanley and MUFG Securities analysts, including Takeshi Yamaguchi, wrote.

“The risk of her favouring excessively dovish monetary policy appears lower than last year.”

Meanwhile, Takaichi has largely been seen as bad news for Japan’s already stressed bond market.

“She’s known to favour stimulus measures and is viewed as wanting the Bank of Japan (BOJ) to take a cautious stance on policy, so that wouldn’t be a great outcome for bond markets,” Skye Masters, head of markets research at National Australia Bank, said in a podcast.

Ishiba’s relatively conservative fiscal stance has been seen as a positive for the JGB market, where yields are relatively low globally, though Japan’s massive debt pile and widening fiscal deficits continue to raise concerns.

The country’s outstanding debt stands at nearly 250% of its gross domestic product (GDP), the highest among developed economies. Budget requests for the next fiscal hit a record for the third straight year, the finance ministry said last week.

The JGB market was dealt a blow in mid-July, when Ishiba’s coalition suffered a considerable defeat in upper house polls. Outsider parties, campaigning on tax cuts and increased spending, gained seats, and speculation swirled for weeks about pressure on Ishiba to step down.

That all came to a head on Sunday, with Ishiba saying he must take responsibility for election losses and instructing the LDP to hold an emergency leadership vote.

The Nikkei share index hit a record high of 43,876.42 on August 19, riding a wave of optimism for corporate governance reforms and investment in artificial intelligence.

Analysts in a Reuters poll see the index easing off that level to 42,000 by year end.

(Reporting by Rocky Swift; Editing by Sumana Nandy)

Stocks gain on rate cut optimism, yen dives after Ishiba resigns

SINGAPORE – Stocks rose and the dollar wobbled on Monday after dismal US labour data sealed the case for rate cuts this month, while the yen fell as investors girded for uncertainty in Japan following the resignation of Prime Minister Shigeru Ishiba.

Gold prices held near a record high while US Treasury yields hit five-month lows after data showed the world’s largest economy created far fewer jobs than expected in August, with markets factoring in chances of a jumbo rate cut.

Much of the focus last week was on elevated long-end bond yields across the globe as investors fretted about the state of various countries’ finances, from Britain and France to Japan.

Some of those worries could return after Japan’s Ishiba resigned on Sunday, leading to political uncertainty in the world’s fourth-largest economy and clouding the policy path for the Bank of Japan.

The spotlight will be on who replaces Ishiba, with investors fretting that an advocate of looser fiscal and monetary policy, such as Liberal Democratic Party veteran Sanae Takaichi, who has criticised the BOJ’s interest rate hikes, could take the helm next.

Yields on super-long Japanese government bonds (JGBs) have already been hovering near record highs, while Japan’s Nikkei share gauge has recently slipped from last month’s record high.

“The markets are going to be framing this around what it means for fiscal policy, inflation, and the BOJ’s response,” said Kyle Rodda, senior financial market analyst at Capital.com.

“I suspect this will weaken the yen a bit and could actually boost stocks. But the latter relies on some leadership certainty first, so the initial move could be a marginally weaker yen.”

The yen fell across the board and was last 0.6% lower at 148.39 per dollar, while the Nikkei rose 1% in early trading.

RATE CUTS ARE HERE

The prospect of an interest rate cut by the Federal Reserve later this month propped up stock markets elsewhere while weighing on the Treasury yields and the dollar.

S&P 500 futures pointed 0.25% higher in early Asian hours on Monday after a volatile session on Friday where the index hit a record high but then closed 0.3% lower. Nasdaq futures advanced 0.25%.

Investor attention this week will be on the US inflation report on Thursday to gauge the risk of rising prices that could help temper some of the enthusiasm for a larger rate cut.

“While most investors remain aligned on a 25 basis point cut at the September Fed meeting, we expect market focus to shift toward calls for a larger move, with a 50bp cut now in play,” said Harun Thilak, head of global capital markets North America at Validus Risk Management.

Traders have fully priced in a 25 bp cut later this month with 8% chance of a jumbo 50 bp rate cut, the CME FedWatch tool showed. They are anticipating 68 basis points of easing by the end of this year.

“The Fed has more than enough reasons and will cut by 25bps … with another two within six-months,” said George Boubouras, head of research at K2 Asset Management.

“US cash rates are notably higher than other developed markets (and) given the resilient and robust US economy, lower cash rates are now required. Fed commentary of further rate cuts will be supportive, without this equity markets will be weaker.”

In the currency market, the euro eased a bit to USD 1.1708 after surging 0.6% on Friday, while sterling last fetched USD 1.3489 after a 0.5% rise on Friday.

Investor attention will also be on France where Prime Minister Francois Bayrou faces a confidence vote on Monday, which he is expected to lose, plunging the euro zone’s second-largest economy deeper into political crisis.

In commodities, gold prices were at USD 3,588 per ounce, just shy of the USD 3,600 milestone. Gold is up 37% this year after rising 27% in 2024.

(Reporting by Ankur Banerjee; Editing by Jamie Freed)

US yields dive as markets bet big on Fed cuts after dismal jobs print

NEW YORK – US Treasury yields slumped on Friday after data showed the world’s largest economy created far fewer jobs than expected in August, reinforcing expectations the Federal Reserve will resume cutting interest rates at a policy meeting this month.

The rate futures market has also started to price in a small probability of a 50 basis-point easing at the end of the two-day meeting on September 17.

In afternoon trading, US two-year yields, which reflect interest rate expectations, and the benchmark 10-year yield both fell to their lowest since April.

The two-year yield was last down 7.9 basis points (bps) at 3.513%. It was down 11 bps on the week, the biggest weekly fall since late July.

The benchmark 10-year yield sagged 8.8 bps to 4.088%. On the week, the yield fell nearly 14 bps, the largest weekly decline since late July as well.

Data from the Bureau of Labor Statistics showed that US nonfarm payrolls increased by only 22,000 jobs last month after rising by an upwardly revised 79,000 in July, the Labor Department said on Friday.

Economists polled by Reuters had forecast payrolls rising by 75,000 positions after a previously reported 73,000 gain in July.

Data showed that in June, the US economy lost 13,000 jobs instead of the initially reported 14,000 payrolls gain.

“The warning bell that rang in the labor market a month ago just got louder. A weaker-than-expected jobs report all but seals a 25-basis-point rate cut later this month,” said Olu Sonola, head of US economic research at Fitch Ratings in New York.

“The Fed is likely to prioritize labor market stability over its inflation mandate, even as inflation drifts further from the 2% target. Four straight months of manufacturing job losses stand out.”

Following the data, the US rate futures market has priced in a 7% chance that the Fed will cut by 50 bps later this month, and a 93% probability of the more standard 25 bp cut, according to LSEG calculations. The 50-bps bet was as high as 15% earlier in the session.

Traders have also priced in about 71 bps of easing this year, or about three cuts of 25-bps rate declines per meeting. That was up from 59 bps on Thursday.

The Treasury yield curve, meanwhile, initially steepened following the jobs report, with the gap between two-year and 10-year yields widening to 59.6 bps, compared with 57.1 bps late on Thursday. On Wednesday, the curve hit 63.8 bps, its widest spread since April.

The steeper curve suggested that traders are pricing an imminent rate cut from the Fed. But it also reflected inflation worries if the Fed cuts too aggressively, which have prompted investors to sell the long end of the curve.

The yield curve was last at 56.2 bps.

In other Treasury maturities, the yield on US 30-year bonds, the focus of an investor sell-off early this week, fell to a two-month low and was last down 10.2 bps at 4.7%. The yield dropped 15 bps this week, the largest weekly decline since late March.

On Wednesday, 30-year yields touched 5% for the first time, since July.

For next week, the key data will be the US consumer prices index (CPI) for August. A Reuters poll showed headline CPI of 0.3% last month and a year-on-year rate of 2.9%.

“A softer-than-expected core inflation print (0.1% below the month-on-month consensus) increases the likelihood that the Fed cuts in October and subsequent meetings,” wrote Wells Fargo in a research note.

We think the risks are relatively symmetric around next week’s CPI report, but the composition will matter.”

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Matt Tracy; Editing by Kevin Liffey, Sharon Singleton, and Chizu Nomiyama )

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