Mixed Jobs Report Spurs Uncertainty Over Fed Rate Cuts

A mixed U.S. jobs report led to a downturn in global equities and U.S. Treasury yields, fueling uncertainty over the Federal Reserve's upcoming interest rate cuts. While employment growth fell short of expectations, the jobless rate still declined, leaving investors unsure about the size of the anticipated rate cut.

MSCI's global equities gauge fell on Friday, alongside U.S. Treasury yields, after a mixed U.S. jobs report. The report fortified expectations for a Federal Reserve rate cut this month but left the market unsure about its magnitude. The Labor Department's data showed U.S. employment rising less than expected in August and a drop in the jobless rate to 4.2% from 4.3% in July, signaling controlled deceleration.

Non-farm payrolls increased by 142,000 in August, falling short of the 160,000 predicted by economists surveyed by Reuters. July's figures were downgraded from 114,000 to 89,000. Matt Rowe from Nomura Capital Management interpreted the data as indicative of a mild slowdown, giving the Fed leeway to consider multiple rate cuts.

Trader bets, as reflected by CME Group's FedWatch tool, showed a probability increase from 60% to 63% for a 25-basis point cut, while a 50-basis point cut probability dipped from 40% to 37%. New York Federal Reserve President John Williams confirmed his support for rate cuts without specifying their extent. Market indices opened high but declined by late morning, with major indexes such as the Dow Jones, S&P 500, and Nasdaq Composite all sliding. European and global stock gauges also saw declines, influenced by Germany's disappointing industrial output figures.

(With inputs from agencies.)