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Markets are tense this morning as investors digest the jump in oil prices last week and the 'reset' of expectations of the Fed keeping interest rates higher for longer after a key US jobs report deemed 'too strong'. The Fed minutes on Wednesday, followed by the US September CPI inflation report on Thursday is set to capture all attention. Earnings starting mostly before US market open on Thursday and continuing Friday will large banks will likely add volatility as investors attempt to guess what is already 'priced-in' as the S&P500 & Nasdaq100 have fallen 24-33% year-to-date. In forex, traders may look for a break of the dollar strength after the significant move last week. The euro, Swiss franc, and pound could recover if sentiment stabilises and the fear factor of an imminent earnings meltdown or recession comes down. 

Job growth slowed in September in the US, but more jobs were created than analysts expected, sending stocks lower as investors bet the Fed will maintain its aggressive tightening monetary policy for longer. Nonfarm payrolls increased 263'000 for the month, compared to roughly 250'000 expected. Labor force participation edged lower, sending the unemployment rate lower to 3.5% vs the forecast of 3.7%. September marks the lowest monthly increase since April 2021, but investors fear it is not enough to convince the Fed to slow down its pace of hiking interest rates. The CPI data point next Thursday for the month of September will be important to watch. 

Fed's Bostic and Daly continue to tell investors they don't plan to cut interest rates next year, despite traders pricing in at least one rate cut next year. They acknowledged that inflation is the last data point to turn after central banks tighten and it may take longer to show up in the data, but they maintain that the Fed needs to reach around 4.25% by the end of the year, which is just about what the market is pricing at the moment. It will likely depend on the next inflation and employment data points. In the near term, employment on Friday and CPI next Thursday. Meanwhile, traders are showing a mild appetite to buy any weakness as markets are still showing oversold conditions, low positioning, and there are increasing signs that the economy (and inflation) are cooling. 

The US job growth (ADP Nonfarm payrolls) was stable but remains below the recent three-month average. Annual pay was up 7.8% in September. The report came higher than forecast at 208k versus 200k  expected, for the month of September, not very reassuring as the Fed would like to see the labor market cool down rapidly. Investors will eyes jobless claims data on Thursday and Nonfarm Payrolls this Friday. Markets remain down 1% and volatile as investors digest 2-days of strong gains. 

US jobs opening data (JOLTs) came below forecast for the month of August, a sign that the jobs market is rapidly slowing in the US, from elevated levels. The news is positive for risky assets as it reinforces the view that the Fed will be able to slightly pullback on its aggressive pace of tightening monetary policy. Investors cheered on the news and sent the Nasdaq and S&P 500 Index higher.