Goldilocks US jobs report gives Fed scope to wait

New Zealand and Australian markets are starting the week on a stronger footing, with softer US jobs data than expected giving the Federal Reserve time to wait before hiking its benchmark interest rate again and spurring gains on Wall Street on Friday.

Oil prices nudged higher heading into the weekend amid reports that Saudi Arabia was planning an attack to break the Houthi militants’ grip on the Red Sea, while the Group of Seven countries agreed to release diesel reserves to avoid export restrictions in the US.

Brazil heads to the polls in a tightly contested presidential election, with incumbent Luiz Inácio Lula da Silva polling on level-pegging against his major rival, Flávio Bolsonaro, although the Polymarket prediction market pricing favours the challenger.

Local data today are light, with ANZ’s monthly commodity price index on the calendar today ahead of the Global Dairy Trade auction later this week, the New Zealand Institute of Economic Research’s quarterly survey of business opinion on Tuesday will provide some respite from political parties’ electioneering.

Time to wait

Australian futures are pointing to a 0.3% gain for the S&P/ASX 200 index when trading opens across the Tasman, while the kiwi dollar traded at 56.14 US cents at 7am in Auckland from 56.12 cents last week after data on Friday showed US jobs grew at a slower pace than expected in September.

Bureau of Labor Statistics figures showed the US added 29,000 jobs last month, while the US unemployment rate ticked up to 4.2%, with the labour market reinforcing expectations that the Fed could pause at its October policy review to see how the economic data pan out.

Stocks on Wall Street rallied on Friday, with the tech-heavy Nasdaq Composite jumping 1.2%, while the S&P 500 rose 0.7% and the Dow Jones Industrial Average gained 0.4%, with Cisco Systems, Caterpillar and UnitedHealth Group at the top of the leaderboard.

That optimism didn’t flow through to bond markets, with the yield on 10-year treasuries up 3 basis points at 5.28%, as oil prices increased on reports Saudi Arabia was planning an offensive against Houthi militants in Yemen to secure the Red Sea shipping route. Brent crude oil futures rose 0.4% to US$102.70 a barrel heading into the weekend.

Oil prices had eased after G7 nations agreed to release 100 million barrels of crude oil and diesel from their emergency supplies to avert diesel export restrictions from the US before the Saudi reports emerged.

“A soft US employment report on Friday night reinforced market expectations for the Fed to hold off tightening again in October, but the impact on Treasury yields was fleeting, ending the session net higher,” Bank of New Zealand senior markets strategist Jason Wong said in a note.

Building reserves

Meanwhile, members of the Organisation of Petroleum Exporting Countries and their partners agreed to keep oil production unchanged next month, while Nikkei Asia reported that Saudi Arabia and the United Arab Emirates would help build oil reserves in Asia, which traditionally relied on imports.

In artificial intelligence news, the Financial Times reported OpenAI discovered dozens of hacks, potentially leaving the firm open to legal damages and government action by the security breaches.

Apple said it planned to change its Mac operating system to make it clearer when AI agents asked to access all data on the devices.

Meanwhile, Brazilians are heading to the polls to vote in its general election, with leftist incumbent Lula facing a close contest with Flávio Bolsonaro, son of the former president Jair Bolsonaro. Polling has been neck and neck, although Polymarket pricing puts a 63% chance of Bolsonaro winning the presidential race.

And the Australian Financial Review reported that Firmus Technologies could list on the Nasdaq as well as the ASX in its A$43.7 billion initial public offering across the Tasman.

ASB Bank economists said New Zealand’s economy had shown resilience this year, navigating the oil shock through the June quarter, and forecasting gross domestic product to expand 0.4% in the September quarter.

Reporting by Paul McBeth. Image from sol on Unsplash.