STOCKS slid and the dollar surged yesterday after US jobs data showed only a timid slowdown in the labour market, setting the stage for further aggressive interest rate hikes. 

Equity markets have taken a battering in the past couple of months, as the US Federal Reserve has made it clear it intends to continue to aggressively raise interest rates until soaring inflation is tamed, even if that means sending the economy into a recession.

There was a brief rebound at the start of the week, when investors hoped data pointing to an economic slowdown would allow the Fed to “pivot,” or slow down rate hikes.

However, the jobs report shows the US labour market is still robust, with hiring in the US economy slowing only slightly in September, to a net gain of 263,000 jobs, from 315,000 in August. 

That was more than the consensus forecast for a net gain of 250,000, sending equities lower and the dollar higher. 

“Those hoping for a Fed pivot have been sorely disappointed with today’s job numbers, which have confirmed that (the) US economy continues to rumble along quite well,” said Chris Beauchamp, chief market analyst at online trading platform IG.

“The latest bear market bounce has now begun to wilt as investors wearily return to expectations” of further Fed rate hikes.

Futures markets show investors saw the report as boosting the odds that the Fed will again undertake a 0.75 percentage point interest rate increase in November.

Major US indices were in the red the entire day, with the broad-based S&P 500 finishing 2.8% lower.

In Europe, Frankfurt fell 1.6%, and Paris shed 1.2%. London ended the day 0.1% lower. 

“Investors are simultaneously fretting that the fall in the pace of hirings indicates a slowing economy, but also that the better-than-expected data shows that the jobs markets hasn’t slowed enough to stop the Fed from hiking rates aggressively,” said markets analyst Susannah Streeter at Hargreaves Lansdown brokerage.  

The next data point that the Fed, and investors, will be scrutinizing is the consumer price index report next week.

Elsewhere, oil prices jumped and were set for their biggest weekly gain since March after Opec and other major producers led by Russia agreed to slash daily output by two million barrels.

Key figures around 2030 GMT

New York - Dow: DOWN 2.1% at 29,296.79 (close)

New York - S&P 500: DOWN 2.8% at 3,639.66 (close)

New York - Nasdaq: DOWN 3.8% at 10,652.40 (close)

London - FTSE 100: DOWN 0.1% at 6,991.09 (close)

Frankfurt - DAX: DOWN 1.6% at 12,273.00 (close)

Paris - CAC 40: DOWN 1.2% at 5,866.94 (close)

EURO STOXX 50: DOWN 1.7% at 3,375.46 (close)

Tokyo - Nikkei 225: DOWN 0.7% at 27,116.11 (close)

Hong Kong - Hang Seng Index: DOWN 1.5% at 17,740.05 (close)

Shanghai - Composite: Closed for a holiday

Pound/dollar: DOWN at US$1.1082 from US$1.1162 on Thursday

Euro/dollar: DOWN at US$0.9743 from US$0.9791

Euro/pound: UP at 87.987 pence from 87.71 pence

Dollar/yen: UP at ¥145.38 from ¥145.14

Brent North Sea crude: UP 3.5% at US$97.92 per barrel

West Texas Intermediate: UP 4.7% at US$92.64 per barrel. – AFP, October 8, 2022.