October 7 Financial Breakfast: Non-farm payrolls are strong, the Fed's expectations of a sharp rate cut have dropped sharply, and the spread of war in the Middle East has supported oil prices

Financial breakfast on Monday (October 7), including important fundamental news, precious metals/crude oil/foreign exchange/commodities/stock market/bond market, international news, domestic news, institutional views, today's important financial data and financial events. The seasonally adjusted non-farm payrolls in the United States in September were 254,000, the largest increase since March 2024. The unemployment rate in the United States in September was 4.1%, the lowest since June 2024. After the release of non-farm data, spot gold fell in the short term and the US dollar index rose. After the strong employment data came out, traders further bet that the Federal Reserve will stick to the 25 basis point rate cut in November and December.

According to CME's "Fed Watch": The probability of the Federal Reserve cutting 25 basis points by November is 96.2%, and the probability of a 50 basis point rate cut is 3.8%. The probability of a cumulative rate cut of 50 basis points by December is 83%, the probability of a cumulative rate cut of 75 basis points is 16.5%; the probability of a cumulative rate cut of 100 basis points is 0.5%

Global major market trends at a glance

1. Precious metals

Last Friday, the gold market experienced extremely violent fluctuations due to the US non-farm payrolls report and geopolitical situation. After a sharp drop to nearly $2,630/ounce, the gold price rose sharply, once breaking through $2,670/ounce, and finally closed down 0.12% at $2,652.84/ounce. Last Friday, spot silver closed up 0.48% at $32.16/ounce.

Adrian Day, president of Adrian Day Asset Management, said that after a strong rise, the gold price may temporarily pause, but it is not expected to fall back deeply.

However, James Stanley, senior market strategist at Forex.com, believes that the gold price will rise this week. Stanley said that the bulls will still not let go. The US dollar fluctuated sharply last week, while the gold price only fell back moderately. Unless or until the Fed backs down on its rate cut plans, gold fundamentals remain bullish, even though it is overbought on both the monthly and weekly charts.

2. Crude Oil

Fearing supply disruptions from escalating conflict in the Middle East, Brent crude prices continued to rise on Friday, but the gains narrowed, closing up 0.63% at $78.06 a barrel. WTI crude oil prices closed up 1% at $74.45 a barrel.

Goldman Sachs said that if Iran's oil supply declines amid a possible escalation of conflict in the Middle East, international crude oil prices could soar by $20 a barrel.

Warren Patterson, head of commodity strategy at ING, said that if Israel attacks Iran's upstream and midstream assets, the oil market could lose 1.7 million barrels of supply per day. Patterson said such an attack would affect Iran's ability to export crude oil, which could push the global market back into a sizable deficit by 2025, even if OPEC+ phases out its voluntary production cuts of 2.2 million barrels per day as planned. According to ING estimates, in this case, the average price of Brent crude oil next year will be slightly above $90 per barrel.

3. Foreign exchange

After the release of shocking US employment data last Friday, the US dollar rose to an intraday high of 102.69 and finally closed up 0.51% at 102.48.

Analyst Nour said that as long as the "exceptionalism" of the US economy continues to suppress bets on the Fed's interest rate cuts, the dollar's rise can continue further.

After the dovish speech of Bank of England Governor Bailey pushed the pound lower on Thursday, the pound rebounded slightly on Friday, but remained at a weak level, and finally fell slightly by 0.02% to 1.3120. Ipek Ozkardeskaya, an analyst at Swissquote Bank, said in a report that the Bank of England's previous cautious stance on interest rate cuts and the unexpectedly strong performance of the British economy in the first half of the year were the main drivers of the pound's strength this year, but now "both look at risk."

Swissquote analyst Ipek Ozkardeskaya said in a report that the Bank of England's previous cautious stance on rate cuts and the unexpectedly strong performance of the British economy in the first half of the year were the main drivers of the pound's strength this year, but now "both look at risk."

The euro continued to weaken against the dollar last Friday, falling to a low of 1.0950, and finally closed down 0.49% at 1.0975. Francesco Pesole, an analyst at ING, said that if Europe and the United States fall below the support level of $1.1000, they may quickly fall to 1.0900.

After the release of the US non-farm data in September, the dollar rose sharply against the yen, closing up 1.16% at 148.64. Japan's new prime minister has "reignited" the market's carry trade bets, and hedge funds have begun to rebuild short positions in the yen.

4. Commodities

Last Friday, LME copper fluctuated at a high level, closing up 0.74% at $9,961.50/ton; LME aluminum closed up 1.18% at $2,665/ton; LME nickel fell back from a high level, closing down 2.04% at $17,815/ton.

5. Stock market

On October 4 (last Friday), A shares continued to be closed due to the National Day holiday.

Germany's DAX30 index closed up 130.74 points, or 0.69%, at 19123.35 points on October 4 (last Friday); Britain's FTSE 100 index closed down 0.04 points, or 0.00%, at 8282.48 points on October 4 (last Friday); France's CAC40 index closed up 63.58 points, or 0.85%, at 7541.36 points on October 4 (last Friday); Europe's STOXX 50 index closed up 33.62 points, or 0.68%, at 4954.95 points on October 4 (last Friday); Spain's IBEX35 index closed up 47.25 points, or 0.41%, at 11665.25 points on October 4 (last Friday); Italy's FTSE MIB index closed up 414.97 points, or 1.25%, at 33,585.00 points on October 4 (last Friday).

The Dow Jones Industrial Average closed up 341.16 points, or 0.81%, at 42,352.75 points on October 4 (last Friday); The S&P 500 closed up 51.13 points, or 0.90%, at 5,751.07 points on October 4 (last Friday); The Nasdaq Composite Index closed up 219.37 points, or 1.22%, at 18,137.85 points on October 4 (last Friday).

6. Bonds

Due to the unexpectedly strong U.S. non-farm report in September, U.S. Treasury yields rose across the board, with the benchmark 10-year Treasury yield closing at 3.9620%; the two-year Treasury yield, which is more sensitive to monetary policy, closed at 3.9280%.

International News

① Hashim Saffieddin, a senior leader of Hezbollah and a potential successor to Nasrallah, was killed in an explosion

② According to AFP: Israeli military officials said they were "ready to respond" to Iran's attack

③ Qatari official: Hamas leader Sinwar is still alive

④Analysts: If Israel's counterattack on Iran causes oil prices to soar, it may have an impact on Harris' campaign

⑤Maybank analyst: Singapore's sticky core inflation may begin to ease in 2025

⑥India and the United States signed an agreement to strengthen the supply chain of key minerals for batteries

Domestic news

①The box office of the 2024 National Day holiday exceeded 1.6 billion

②Since the National Day holiday transportation, the national railway has completed a total cargo shipment of 68.823 million tons

③Shanghai Stock Exchange issued a notice to extend the time for accepting designated transaction declaration instructions

Institutional viewpoint summary

①Hubert Moolman, an analyst at the gold information website Gold-Eagle, said that market confidence is turning to gold, not the US dollar

②Former financial officer of the Japanese Ministry of Finance: By 2025, the US dollar may reach 130 yen

③Huajin Securities Deng Lijun: The rapid rise of A-shares has not shown signs of peaking

④Hua'an Securities: The policy combination has been implemented, and the valuation of home furnishings can be expected to be repaired

⑤Huatai Securities: Optimistic about the opportunities in the Hong Kong stock software industry

⑥CITIC Construction Investment: The A-share market has entered a new stage Investment decisions should be made with a bull market mindset

⑦ Goldman Sachs: China's stock market rating has been upgraded to "overweight" and can rise another 15%-18%

⑧ GF Securities: Hong Kong stocks are in the second stage of the bull market, and the third stage needs to be observed

⑨ ING: UK economic growth is expected to be unsustainable

⑩ Goldman Sachs: The US September employment report reset the narrative of the labor market. We have lowered the probability of a US recession in the next 12 months by 5% to 15%.