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US Jobs Surge Stuns Markets, Fed Rate Cut Bets Falter
12 Feb
Summary
- January jobs report shows 130,000 roles added, doubling forecasts.
- Traders now expect the first Fed rate cut in July, not June.
- US economic strength overshadows calls for lower borrowing costs.
The latest US monthly employment report revealed a significant surge in job creation, with 130,000 roles added in January. This figure exceeded median forecasts by a substantial margin, signaling a remarkably robust economy.
This unexpected strength in the labor market has directly impacted financial markets, leading traders to reduce their expectations for imminent Federal Reserve rate cuts. Short-dated Treasuries experienced notable declines, with two-year yields rising. Money markets have recalibrated, now pricing in the Fed's next rate cut for July instead of June.
The economic data suggests that current US economic strength is counterbalancing the desire for lower borrowing costs. This resilience is a positive sign for both the economy and financial markets, even as it provides the Federal Reserve with more flexibility to maintain current interest rate levels.
Despite some corporate concerns, such as Cisco Systems' tepid margin forecast, other companies like McDonald's reported strong US sales growth. In commodities, oil prices saw an increase due to Middle Eastern tensions, while nickel extended its gains following production cut signals from Indonesia.
