JOB GROWTH

According to the latest data released by the Labor Department, the U.S. economy saw a significant increase in job creation in September, surpassing expectations and leading to a decrease in the unemployment rate to 4.1%. The nonfarm payrolls surged by 254,000, indicating a robust employment picture and contributing to a positive outlook for the labor market. This growth in job creation was supported by an increase in average hourly earnings by 0.4% and a 4% rise from a year ago. Key industries such as restaurants, health care, and construction experienced notable job gains, further bolstering the overall employment landscape. These positive economic indicators could prompt the Federal Reserve to consider a more gradual approach to interest rate reductions in order to maintain economic stability, and as for the CME Group’s FedWatch tool, it is currently showing that traders are now pricing in an 89.5% chance of a quarter percentage point rate cut in November.

MIXED RESPONSES

The latest jobs report has caused U.S. Treasury yields to jump as investors digested such news of the recent stronger-than-expected job growth. This positive economic data led to a rise in both the 10-year and 2-year Treasury yields, while the value of the U.S. dollar was also boosted, and the stock market began the trading session on the green side. Nevertheless, not all markets responded positively, as although gold’s performance typically thrives during times of low interest rates, this time it was affected negatively and prices decreased by 0.51%.

SKYWARD PRICES

With the current Middle East tensions escalating, oil prices continue to be on a rising trend as fears of potential disruptions to crude oil supplies. Iran and Israel’s conflict has raised concerns about strikes on oil infrastructure, causing market uncertainty, and as President Joe Biden’s mentioned a potential support for Israeli actions on Iran’s oil facilities, such uncertainty has been heightened. As of 8:00 AM Brent crude exceeded $78 a barrel, while U.S. West Texas Intermediate also climbed to around $74 a barrel. Nonetheless, it is worth noting that despite the possible risks, global oil markets remain well-supplied, supported by OPEC’s spare production capacity. Moreover, the resolution of a leadership dispute in Libya has led to the reopening of oilfields and export terminals, with production levels expected to double.

POSSIBLE SWINGS

The ongoing Bitcoin mostly bull run, which started in October last year, has led to a period of relative quiet movement during the weekends, however, a significant change in volatility seems to be on the horizon. This is because the current Bitcoin “implied volatility term structure” indicates that larger price swings are expected on October 5, in comparison to the days leading up to October 25. In fact, options data from Deribit, monitored by Arbelos Markets, has revealed an annualized IV of 51.44% for options expiring on October 5, a figure that is notably higher than the figures for options expiring on October 6, 11, 18, and 25. Traders are attributing the increase in volatility forecasts to potential impacts from the latest release of the nonfarm payrolls report along with the potential Israeli retaliatory actions following Rosh Hashanah.

SPARKING DEMAND

Prices of base metals like copper are on the rise, boosted by growing optimism surrounding Chinese demand. Copper increased by 0.45% to $9,940 per ton, while aluminum and zinc also rose by 1.4% and 1.2%, respectively. Let’s highlight that as the recent economic stimulus measures implemented by the Chinese government were designed to boost economic growth by increasing spending and investment, when such measures were put in place, they can lead to an increase in consumer and business activity, and this ultimately drove up demand for goods and services, including commodities like base metals. As a result, investors became more optimistic about Chinese demand for these commodities, leading to a rise in prices. Nevertheless, it is important to remark that experts caution that this uptick in prices may be short-lived without a significant rebound in the stagnant Chinese property market. Thus, despite the current optimism, it is very important to keep in mind that the future of base metals remains uncertain.