Global markets continue sell-off after a solid U.S. NFP jobs report

Financial markets around the world continued their downward trend momentum on Monday morning due to a broader risk aversion sentiment as investors worry that last Friday’s stronger-than-expected U.S. NFP-employment data will keep the Federal Reserve on an aggressive path of interest rate hikes.

Traders extremely experienced volatility last week, with the S&P 500 index bouncing 5% on Monday-Tuesday, recording its largest two-day gains since 2020 before resuming losses on the following days after the hotter-than-expected U.S. Nonfarm Payrolls report for September last Friday, sparking fear that the Federal Reserve would continue hiking rates aggressively.

The S&P 500 index lost 3%, the tech-heavy Nasdaq Composite plunged nearly 4% while dollar and bond yields jumped to weekly highs on Friday after the release of the U.S. unemployment rate which came at 3,5% for September versus the forecast of 3.7%, an indication that the U.S. labor and corporate market remains strong and resilient despite efforts by the Federal Reserve to slow the economy, and the headwinds of the global energy crisis.

S&P 500 index, Daily chart

After Friday’s jobs report, market participants are now pricing in a nearly 75% chance the Federal Reserve will raise interest rates by another 75 basis points in the next FOMC policy meeting on November 02, and a 60% chance for another 50 basis points hike on December 14.

The Federal Reserve has raised interest rates five times this year for a total of 3 percentage points and is expected to continue hiking through at least the mid-2023, to bring down inflation running near its highest annual rate in more than 40 years.

On top of that, the U.S. stock futures were also lower by 0,50% in early premarket trade on Monday, with traders looking ahead to a key U.S. CPI inflation data for September on Thursday which will be a catalyst into the Fed’s stance on interest rates, and the beginning of corporate earnings season.

Asia-Pacific markets also settled into the deep red this morning following the negative market sentiment, with Hong Kong’s Hang Seng index leading losses by nearly 3% as Chinese chipmakers listed in the city plunged following new export rules from the U.S.

A similar bearish trend is seen in Europe this morning as well, with the pan-European Stoxx 600 falling 0.5% in early trade, led by tech stocks following the overnight selloff in the tech sector in Asia.