US Labor Market Slowdown Fuels Expectations⁤ of Interest Rate Cut

The‍ New York foreign exchange ⁤market‍ saw the yen ⁢rise by ‍more than 1% against ⁢the dollar, briefly reaching 143.76 yen per dollar, as traders increasingly expect a major interest⁢ rate cut by the Federal Reserve in response to new economic‌ indicators ‍showing a‌ slowdown in the U.S. labor market.

The number of U.S. job openings fell to 7.673 million in July, down from the median forecast⁣ of 8.1 million among economists surveyed by Bloomberg. The yen was trading at the high 144 yen level against the dollar before the⁢ data ⁣was released.

Market Expectations

Monetary ​policymakers have ‍made it clear they would not ⁢welcome a further slowdown in the labor market, and the Federal Open Market Committee is⁢ widely expected ⁢to cut interest rates when it meets this month.

“The probability of ⁣a 50 basis point cut in September has risen to‌ about ⁣50 percent, up from ‌25-30 percent earlier this week,” said Win Thin,​ global head⁢ of currency‌ strategy at ‍Brown Brothers ⁢Harriman.

Government Bonds

U.S. Treasury yields immediately ⁤fell in response to the data,​ with the 2-year yield briefly falling ‌below the 10-year‍ yield. This marks only the ‍second‌ time the yield curve has inverted since 2022.

Expectations of a ⁤major US interest⁢ rate cut grow stronger⁢ in response to weak job‌ data – inverted yield curve temporarily disappears.

Stock Market

The S&P 500 index fell, with semiconductor giant Nvidia ‍continuing to fall. It was ⁢the largest two-day drop‌ since‌ October 2022.

Among other individual stocks, U.S. Steel fell‌ sharply, while ​U.S. telecommunications giant Verizon ⁢Communications Inc. also fell.

Crude ⁣Oil

Oil futures slumped to their lowest in nearly a ‌year as worries about ‍fading ⁣demand persisted despite the possibility that OPEC+, the group made up of ‍the Organization of the Petroleum Exporting Countries and non-OPEC producers, might delay production increases.

The ⁢international benchmark⁤ Brent crude closed at⁣ its lowest since⁤ June 2023. OPEC+ is‌ close to agreeing to ​delay⁢ a ‍planned October supply increase,‌ the representatives said, asking not to be identified discussing ⁤private information.

Gold

Spot gold prices were ⁤reversing losses as U.S. jobs data ‍showed growing signs⁢ of a slowdown in⁣ the labor market, paving the way⁣ for the Federal Reserve ​to cut⁢ interest rates soon.

After the ⁤jobs report, Treasury ⁣yields and‍ the dollar fell sharply, ⁤while gold‌ reversed ​its ⁤earlier⁤ decline and rose 0.3% at one point. The interest‌ rate swaps market is currently pricing in a one-point rate cut this year.

Traders are now focused on the U.S. ​employment⁤ report for‌ August, due to be released on ​the⁤ 6th. ‍Economists surveyed by Bloomberg expect nonfarm payrolls to rise by about 165,000⁣ from the previous ⁣month. Any signs of a weakening in the ‌labor sector could ⁣support a more ⁢aggressive shift in monetary policy from the Federal Reserve, which ⁤could⁣ be positive​ for gold.

As of 2:52 pm New York time, the spot‌ price‌ of gold was ‍up 98 cents (less than 0.1%) from the previous day to $2,493.89 an ‌ounce. The December gold futures contract on ‌the New York Mercantile Exchange (COMEX)‍ closed⁤ at just $2,526, up $3 (0.1%).

Market Data

Last exchange rate change from previous trading day

• Bloomberg Dollar Index: 1232.99 -4.18 -0.34%
• Dollar/Yen: ¥143.79 -¥1.69 -1.16%
• Euro/Dollar: $1.1080 ​$0.0037 ‌0.34%

Latest government bond price change from previous trading day (bp)

• US 30-year bond⁤ yield: 4.06%-6.2-1.49%
• US 10-year bond yield: 3.76%-7.4-1.93%
• US 2-year bond yield: 3.76%-10.3-2.67%

Stock closing price change​ from previous‌ trading day

• S&P 500: ⁢5520.07 ⁤-8.86 -0.16%
• Dow Jones Industrial Average: 40974.9738.040.09%
• Nasdaq Composite: 17084.30 -52.00 -0.30%

Oil futures

• London ICE’s November Brent crude contract:⁤ $72.70‍ a barrel
• New York Mercantile Exchange’s (NYMEX) October West Texas Intermediate (WTI)​ futures: $69.20