Things to watch in markets ahead of the first week in October...

Things to watch in markets ahead of the first week in October...

Traders will be closely looking at US jobs report from Friday to determine the effect rate hikes, set by the Fed, are having on the economy. Numerous Fed members are due to make announcements this week, as markets are trying to anticipate another 75bp rate hike at the banks come November time. Markets are expected to remain volatile after closing on a decline for the third consecutive time. Over in the UK, traders will be paying attention to the conservative party’s annual conference for any signs of a U-turn regarding the tax-cutting budget which has hammered down the sterling and sent borrowing costs through the roof!

September employment report:

• Most recent jobs report for September will highlight whether the imposed rate hikes by the Fed are impacting the labour market. Experts are estimating the US economy has created 250,000 jobs last month, with the unemployment rate holding steady at 3.7% (investing,com). Another strong report may prompt even more hawkishness from the Fed, potentially tearing the markets further. 

Stock market volatility:

• The stock market is entering the final hurdle of 2022, with rising interest rates and major fears of a recession. Wall street has posted three straight declines in a row with Nasdaq and S&P 500 having the longest losing streak since 2008, and the Dow’s longest slump in 7 years (investing.com). As the federal reserve tightens up its monetary policy in order to tame inflation, US treasury yields rocketed to their highest levels in more than a decade. Crashing stock valuations. Investors believe the volatile will continue until there is proof that the Fed is taming the battle with inflation. 

UK market turmoil:

• After the UK government triggered a market meltdown with its ‘mini-budget’ plan to cut taxes and pay for it with borrowing, the pound has hit its all-time lows. As a result, BoE has splashed out £65 billion ($69 billion) on long-dated gilts to cool the markets down (investing.com). However, due to this the BoE has now postponed its plan to sell bonds, which has led to the loosening in monetary while tightening interest rates all at the same time. As of November, rates are supposed to rise further and the plan to sell bonds shall continue.