A Strong US Labor Market Report Has Revived Concerns About A Renewed “Hawkish” Fed Stance

The US equity market ended Friday’s session mixed following the release of a strong labor market report, which cooled investors’ hopes for a dovish pause from the Federal Reserve. By the end of the day, the Dow Jones (US30) fell 0.51% (‑0.09% for the week). The S&P 500 (US500) declined 0.38% (+0.27% for the week). The tech‑heavy NASDAQ (US100) closed in positive territory at 0.21% (+0.48% for the week). US nonfarm payrolls increased by 162,000 in August, far exceeding consensus expectations (a modest 45,000-58,000). The strong data revived concerns about a renewed hawkish Fed stance, triggering a rebound in Treasury yields.

The upcoming shortened week (due to Labor Day on Monday) will focus global markets on the key US inflation data for August. Consumer Price Index (CPI) growth is expected to accelerate to 0.4% month‑over‑month versus 0.1% in July, with core CPI projected to rise 0.2%. These figures will serve as a decisive test for the Fed ahead of the September 16 meeting, especially after Chair Kevin Warsh emphasized the need for sustained disinflation to avoid further monetary tightening. Traders will also assess Producer Inflation (PPI), with both headline and core readings expected to increase by 0.3%, as well as the preliminary University of Michigan Consumer Sentiment Index, which is likely to reflect persistent household pessimism.

Canada’s economy unexpectedly lost 41,700 jobs in August, sharply missing the consensus expectation of a 15,000 increase and erasing July’s surge (+75,100). The weak data intensified pressure on the Bank of Canada, prompting markets to price in a softer policy stance. Against the backdrop of strong US labor data (NFP +162,000), expectations for the Federal Reserve have shifted toward a more hawkish scenario. The widening interest‑rate differential between the US and Canada continues to provide a solid fundamental tailwind for the US dollar against the loonie.

The Mexican peso (MXN) strengthened noticeably in early September, approaching 16.89 per US dollar – its strongest level since May 2024. The resilience of the US labor market has reinforced investor expectations of a firm Fed stance and potential rate actions. The narrowing rate differential between the Fed and the Bank of Mexico remains the key risk factor for the peso’s forward trajectory.

In Europe, Friday’s session saw Germany’s DAX (DE40) rise 0.17% (‑1.58% for the week), France’s CAC 40 (FR40) slip 0.09% (‑1.50% for the week), Spain’s IBEX 35 (ES35) gain 0.25% (‑0.10% for the week), and the UK’s FTSE 100 (UK100) edge down 0.01% (+0.36% for the week).

The upcoming week in Europe will be packed with key macro releases and major central‑bank meetings, with the European Central Bank’s decision taking center stage. The regulator is expected to raise its key interest rate by 25 basis points to 2.60%, amid accelerating Eurozone inflation to 3.3% in August. Investors will closely examine updated macro outlooks and the ECB’s guidance on the future policy path. Final Q2 Eurozone GDP and employment data will also be released, along with a set of German indicators, including industrial production (predicted +0.3%), final August inflation, and trade figures.

WTI oil ended the week near $91.2 per barrel, gaining more than 9% – its strongest weekly performance since mid‑July. The main drivers were the unresolved geopolitical crisis in the Persian Gulf and risks of a potential closure of the Strait of Hormuz amid reciprocal missile strikes between Iran and the US, as well as tough statements from Israeli leadership. The only factor capable of cooling the rapid price surge for now is physical supply: despite reduced traffic through the Strait of Hormuz (shipping intensity has fallen below average), stable Iraqi exports (around 2.35 million barrels per day via southern routes in August) are preventing a critical market shortage.

In Asia, Japan’s Nikkei 225 (JP225) rose 1.26% on Friday (‑0.99% for the week), China’s FTSE China 50 gained 0.36% (‑0.68% for the week), Hong Kong’s Hang Seng (HK50) advanced 1.74% (+0.91% for the week), while Australia’s ASX 200 (AU200) slipped 0.16% (‑0.66% for the week).
This week in Asia, investors will focus on China’s August trade data (with a widening surplus expected amid resilient exports) and China’s CPI dynamics, with annual inflation projected at 0.9% versus 0.5% previously. Australia will release consumer and business confidence indices, household inflation expectations, and final building‑permit data.

• S&P 500 (US500) 7,718.60 -29.11 (-0.38%)

• Dow Jones (US30) 53,414.25 -271.86 (-0.51%)

• DAX (DE40) 26,046.40 +43.08 (+0.17%)

• FTSE 100 (UK100) 10,831.09 -0.43 (-0.01%)

• USD Index 99.16 +0.25 (+0.25%)

News feed for: 2026.09.07

• Germany Industrial Production (m/m) at 09:00 (GMT+3) – EUR (LOW)

• Sweden Inflation Rate (m/m) at 09:00 (GMT+3) – SEK (MED)

• Switzerland Unemployment Rate (m/m) at 10:00 (GMT+3) – CHF (MED)

• Eurozone GDP (q/q) at 12:00 (GMT+3) – EUR (MED)