Mixed U.S. Jobs Data Fuels Fed Rate Cut Speculations

MSCI's global equities fell, and U.S. Treasury yields declined following a mixed U.S. jobs report, reinforcing expectations for a Federal Reserve rate cut. The Labor Department reported less-than-expected job growth and a steady jobless rate, leading traders to anticipate a 25 basis point rate reduction.

MSCI'S global equities gauge lost ground on Friday and U.S. Treasury yields fell after a mixed U.S. jobs report cemented expectations for the Federal Reserve to lower interest rates this month. However, it left investors uncertain about the size of the cut. The Labor Department reported U.S. employment increased less than expected in August while the jobless rate dropped in line with expectations to 4.2% from 4.3% in July, signaling an orderly slowdown.

Non-farm payrolls rose by 142,000 in August, falling short of the 160,000 growth economists had predicted. July numbers were also revised down. Matt Rowe, head of portfolio management at Nomura Capital Management, remarked, "It looks like things are slowing down a bit, not like something cataclysmic is imminent. What the market's going to get out of this is clear cover for the Fed to be cutting rates and a pathway to cutting rates more than once."

The report led traders to bet on a 63% probability of a 25 basis point Fed rate cut this month. Federal Reserve Bank of New York President John Williams stated he favors cutting rates but did not specify the magnitude. Wall Street indexes initially rose but declined later in the morning. At 11:39 a.m. ET, the Dow Jones fell 337.59 points, the S&P 500 lost 80.87 points, and the Nasdaq Composite dropped 392.48 points. Various global stock indexes also recorded losses, and U.S. 10-year Treasury yields fell, reflecting market uncertainty.

(With inputs from agencies.)