Fed minutes, G7 oil reserve release and long-end Treasury yields set the tone for next week

Markets enter next week with the focus shifting away from whether the Federal Reserve will raise rates in October and toward whether a move could still come in December. That turn followed a weak U.S. September payrolls report, which showed only 29,000 jobs added, well below the 90,000 expected, while August payrolls were revised down by 133,000 and the unemployment rate rose to 4.2%. After the release, rate expectations cooled sharply. CME FedWatch data showed the probability of no change in October rising to 83.9%, while the probability of a December hike stood at 66.1%. At the same time, the 10-year U.S. Treasury yield briefly climbed to 5.36%, and the U.S. dollar index hit a 17-month high, keeping pressure on gold and broader risk assets. Investors will now watch the Fed’s September meeting minutes, due at 2 a.m. Beijing time on Thursday, for details on how officials weighed inflation and labor-market risks and how divided they were over another hike versus a pause. Next week’s calendar also includes remarks from Fed Governor Michelle Bowman and St. Louis Fed President Alberto Musalem, U.S. Treasury buyback and auction operations, the U.S. ISM non-manufacturing PMI, and developments in energy markets after the G7 agreed to release 100 million barrels of oil and diesel reserves.