Bleak US jobs data to jolt markets: What investors should watch this week

Dubai: Concrete signs of a bleak US labor market came to light late last week, which is expected to send shockwaves through global markets in the days to come.

US stocks fell sharply on Friday, while Treasuries surged, with two-year yields hitting their lowest point since 2022. Investors are now pricing in nearly three Federal Reserve rate cuts this year, reflecting fears that the Fed may need to act swiftly to prop up the economy.

Even with markets bracing for easing, US equities struggled to hold onto recent highs. Concerns are mounting that the Fed could be behind the curve, facing a weaker jobs market while inflation remains stubborn.

The sharp slowdown in hiring triggered a flight to safer assets like government bonds and gold, rattling investor confidence and adding volatility to markets.

Asian and European markets had advanced on Friday, riding a global equity rally. But with the US jobs data arriving after their close, these markets are expected to face jolts early this week as investors reassess risk and adjust positions.

Francesco Sandrini, head of multi-asset strategies at Amundi, said: “We have already seen signs that jobs may be weakening, paving the way for a done deal in September. The numbers can confirm to some extent an easing stance of the Federal Reserve.”

Fed Chair Jerome Powell’s dovish Jackson Hole comments have also fanned rate-cut expectations. Ken Crompton, head of rates strategy at National Australia Bank, added: “Unless payrolls are stellar, it’s hard to see much changing market expectations for a September cut.”

For new investors, the key takeaway is clear: the weakening jobs market could lift equities temporarily, but uncertainty remains high. Watch Fed policy closely and plan for swings in the week ahead.