30-year Treasury yield up 12bp, Hang Seng down 2.2%, Nikkei 225 up 2.9%
Softer US hiring lowered front-end rate expectations, while long-end yields continued to rise on fiscal and inflation pressures

US nonfarm payrolls increased by 29,000 in September, against a consensus of 84,000. August was revised down to 133,000 and July to a decline of 10,000, a combined downward revision of 60,000. The unemployment rate rose to 4.2% from 4.1%, and average hourly earnings rose 0.1% m/m and 3.0% y/y, the slowest annual pace since 2021 (CNBC, BLS). Earlier, on Oct 1, Vice Chair Jefferson said that future adjustments should be based on a careful reading of the data and could take more time, and Williams declined to commit to an October move. Market pricing of a hike at the Oct 27–28 meeting fell to about 22% from 64% a week earlier (Yahoo Finance).

Through Thursday (FRED), the 2-year Treasury yield fell 3bp to 4.78%, while the 10-year rose 7bp to 5.24% and the 30-year 12bp to 5.61%; the 10s-2s spread widened 10bp to 46bp. Of the rise in the 10-year yield, 5bp came from the real yield and 2bp from breakeven inflation. On Friday yields fell initially after the payrolls release and then reversed, with the 10-year ending at about 5.28% (same source; not included in the FRED weekly data). The MOVE index of Treasury volatility rose 11.3 points to 107.3. The S&P 500 gained 0.73% on Friday to 7,722.72 but declined 0.27% for the week. Lower hike expectations mainly affected the front end; long-end yields remain driven by supply and term premium (inference).

Eurostat's flash estimate put euro-area HICP inflation at 3.8% in September, up from 3.2% in August and above the 3.6% consensus, the highest since September 2023. Energy prices rose 18.8% y/y and services 3.2%, while core inflation was 2.5% (Eurostat, CNBC). Energy accounted for roughly half of headline inflation, reflecting the conflict in the Middle East.

European government bonds remained under pressure. The UK 30-year gilt yield rose to 6.020% on Oct 1, the highest since 1998 and the first G7 long-dated yield above 6% since 2012 (Seoul Economic Daily). The French 10-year yield reached its highest since 2008 as the government presented a budget with EUR 54 billion of fiscal consolidation (Yahoo Finance). After the US payrolls release on Friday, the German 10-year yield fell more than 6bp to 3.454%.

For the week, the CAC 40 fell 2.2%, the FTSE 100 2.2%, the SMI 2.0%, the Euro Stoxx 50 1.0% and the DAX 0.7%. The euro declined 1.0% against the dollar, so in dollar terms the Euro Stoxx 50 fell about 2.0% and the CAC 40 about 3.2%. European equities recovered on Friday after the US payrolls release, with the Stoxx 600 up 0.8% on the day, but the index still declined 1.1% for the week, and bank stocks recorded their largest weekly decline since April (Yahoo Finance).

The Nikkei 225 rose 2.9% for the week to 68,309.46. It gained 3.3% on Oct 1 to 68,956.72 as Micron's results lifted semiconductor equipment stocks, with Lasertec up 11.1% and Advantest up 9.8% (Business Recorder), before profit-taking lowered the index 0.9% on Friday. The BOJ's Q3 Tankan showed the large manufacturers' index rising to 24 from 22, a sixth consecutive quarterly improvement, though below the expected 25 (FXStreet, Japan Times). The yen appreciated 0.6% against the dollar, so the Nikkei 225 gained about 3.5% in dollar terms.

China's official manufacturing PMI rose to 50.1 in September from 49.8, returning to expansion after two months below 50; the non-manufacturing PMI rose to 50.2 from 49.0 (Xinhua). Mainland markets traded only three sessions this week: they were closed on Sept 25 for the Mid-Autumn Festival and from Oct 1 to Oct 7 for National Day, and reopen on Oct 8 (SSE). The 1.2% decline in the Shanghai Composite shown in the table compares the Sept 30 close with the Sept 24 close.

Hong Kong was closed on Oct 1. When trading resumed on Oct 2, with southbound Stock Connect suspended until Oct 8, the Hang Seng fell 2.60% to 23,972.29, its largest daily decline since March 23, led by financial and gaming stocks (BigGo Finance). The Hang Seng declined 2.2% for the week, after a small cumulative gain over the three sessions to Sept 30.

In local-currency terms, Brazil's Bovespa (+4.7%), the Nikkei 225 (+2.9%) and Taiwan's TAIEX (+0.9%) led, while India's Nifty 50 (-3.1%), France's CAC 40 (-2.2%), the Hang Seng (-2.2%) and the FTSE 100 (-2.2%) lagged. The MSCI ACWI fell 0.6%, the emerging-markets ETF 0.5% and the S&P 500 0.3%. Brazilian equities rose 2.63% on Friday as investors positioned ahead of the first round of the presidential election on Oct 4 (InfoMoney). The Nifty 50 posted an eighth consecutive weekly decline amid continued net selling by foreign investors (5paisa).

Converting to dollars changes the ranking. Mexico's IPC fell 0.7% and the peso 2.2%, a decline of about 2.9% in dollar terms. The Bovespa rose 4.7% and the real fell 0.6%, a gain of about 4.1% in dollars. Korea's KOSPI fell 1.1%, but the won appreciated 1.9%, leaving a gain of about 0.7% in dollars. In dollar terms the CAC 40 fell about 3.2% and the Nikkei 225 rose about 3.5%. These figures compound the weekly index and currency changes and are approximate.

Holidays and reference dates: the Shanghai Composite traded only three sessions this week, and its weekly change compares Sept 30 with Sept 24. India was closed on Oct 2, so the Nifty 50 runs to Oct 1. Owing to the Mid-Autumn holidays, the prior-week reference dates for the KOSPI and TAIEX are Sept 23 and Sept 24 respectively.

The dollar index rose 0.96 to 101.93, a third consecutive weekly gain. The won led with a 1.9% appreciation against the dollar, supported in part by month-end dollar sales by exporters (Korea Times); the yen rose 0.6% to 157.93 and sterling 0.2%. The yuan rose 0.1%; the onshore FX market closed from Oct 1 for the holiday.

The Mexican peso declined 2.2%, the largest fall, and on Oct 1 reached its weakest level since December 2025; its 6.32% decline in September was the largest monthly depreciation in more than two years. After Banxico held its rate on Sept 24, the Mexico–US rate differential narrowed to 250bp (Rio Times). The euro fell 1.0%, the Australian dollar declined 1.1% despite the RBA's hike to 4.60%, and the Brazilian real fell 0.6% ahead of the election.

In the United States, through Thursday the 2-year yield fell 3bp and the 30-year rose 12bp, steepening the curve. Monthly data show UK and Australian 10-year yields both at around 5% in August, France at 4.00%, Germany at 3.18% and Japan at 2.94%. This week's moves, including the UK 30-year yield reaching 6% and the French 10-year rising to its highest since 2008, are not yet reflected in the monthly table.

Among bond ETFs, US long Treasuries (TLT) fell 1.9%, EM dollar bonds (EMB) 1.7% and unhedged non-US government bonds (BWX) 0.7%, while hedged non-US investment grade (BNDX) rose 0.1%; the gap between the last two mainly reflects the stronger dollar.

Central bank policy continued to diverge. The RBA raised its cash rate 25bp to 4.60% on Sept 29, its fourth increase this year (RBA). The Bank of England held at 3.75% in September, with three members voting for a hike. The ECB meets on Oct 29 facing a 3.8% inflation print, while market pricing of an October Fed hike has declined significantly. The Reserve Bank of India announces its decision on Oct 7, and most economists expect a 25bp increase.

Precious metals led declines. Gold fell 3.7% to USD 4,162.30 per ounce, a second consecutive weekly loss, and silver fell 6.6%, as the stronger dollar and higher real yields weighed on prices (Business Recorder).

Front-month Brent futures fell 2.0% to USD 102.25 and WTI 1.4% to USD 91.11. On Oct 2 the G7 agreed to release 100 million barrels of diesel and other reserves over four months, with a front-loaded diesel release in the first 20 days (The National). The November Brent contract expired on Sept 30, and on a comparable-contract basis Brent was broadly unchanged for the week (EnergyNow); the continuous front-month change includes the effect of the roll. Copper fell 3.0%, US natural gas 5.0% and corn 5.8%. Bitcoin was broadly unchanged (+0.05%) and ether fell 0.7%.