No Friday Jobs Report for September

STOCK INDEX FUTURES

Nasdaq and S&P 500 futures rose ahead of the bell, while the Dow lagged behind as the government shutdown continues with seemingly no progress made towards a new funding deal. There is no new jobless claims data for today, and without a deal to get the government back up and running again before tomorrow, September’s labor report is unlikely to be published. The Senate will be out Thursday in observance of Yom Kippur, making Friday the next chance to hold a vote on funding.

On Wednesday, the indexes pared early losses to finish the session higher, with the Dow and S&P notching records while the Nasdaq posted a solid gain as investors shrugged off concerns over the government shutdown and took ADP’s dismal private payroll report in stride. The healthcare sector led gains, with Pfizer shares surging after the company reached an agreement with the Trump administration to allow patients to purchase discounted prescription drugs through a new federal website.

CURRENCY FUTURES

US DOLLAR: The USD index fell to near a one-week low as markets continue to weigh the impact of the US government shutdown and the lack of economic data. Challenger, Gray & Christmas’ job cuts data showed 54,064 new cuts in September, down from nearly 86,000 in July, though the data did little to move markets. The dollar suffered early losses on Wednesday following the release of the weak ADP employment report but pared losses to trade close to flatline following the release of ISM manufacturing data that showed manufacturing activity contracted again, although at a slower pace. The survey came in slightly above expectations, while its input prices gauge remained at historically elevated levels despite easing slightly from the previous report.

EURO: Euro futures are higher, supported by a weaker dollar and eurozone inflation figures released yesterday that showed an acceleration of inflation, cementing expectations that the European Central Bank will leave its key interest rate unchanged for the remainer of the year. Consumer prices rose to 2.2% in September, up from 2.0% in the previous three months and above the bank’s 2% target. Core inflation remained stable; however, services inflation picked up, indicating that some underlying price pressures have not fully eased. Regardless, the ECB the uptick in inflation and expects it to be short-lived. ECB President Christine Lagarde said Tuesday that inflation is unlikely to rise much above, or fall much below, the bank’s target in the months ahead. Looking to 2026, inflation is expected to fall below the bank’s 2.0% target, which could prompt the ECB to cut rates. Elsewhere on the data front, unemployment picked up to 6.3% in August, from an all-time low of 6.2% in July. Among the bloc’s largest economies, Spain (10.3%), France (7.5%), and Italy (6%) continued to see the highest jobless rates, while Germany (3.7%) and the Netherlands (3.9%) recorded the lowest.

BRITISH POUND: British pound futures slipped against the dollar. No new data out of the UK today; markets will look ahead to comments from Bank of England Governor Andrew Bailey Friday morning for potential policy cues. British house prices rose more than expected, increasing 0.5% in September after a 0.1% drop in August. Real wage growth in the country has slowed to 1% from 3.4% a year ago, while inflation has remained sticky. Investor focus also remains on the widely held opinion that Finance Minister Rachel Reeves will hike taxes later in November. Reeves said on Monday she would not raise sales tax, known as value added-tax, national insurance contributions, or the rates of income tax. Markets are still pricing in the next rate cut from the Bank of England to happen in 2026, as inflation remains a challenge and as BoE officials lean towards a hawkish policy stance.

JAPANESE YEN: Japanese yen futures are higher after rising in the previous session, supported by flight-to-quality longs and a weaker dollar amid the US government shutdown. Markets will look ahead to services PMI data out later in the evening. The Bank of Japan’s quarterly Tankan corporate survey showed confidence among large Japanese manufacturers while firms maintained upbeat spending plans. The BoJ had highlighted the survey as a key gauge for the timing of rate hikes, with markets now pricing in a 40% chance of a quarter-point increase at this month’s policy meeting. BoJ officials have leaned hawkish in recent days; board member Asahi Noguchi (dove) said on Monday that the need for policy tightening was increasing “more than ever.” Japan’s top trade negotiator, Ryosei Akazawa, said on Wednesday that its US-bound investment package of $550 billion will have no impact on the foreign exchange market.

AUSTRALIAN DOLLAR: Australian dollar futures fell as domestic data weighed on the Aussie. Australian household spending rose only marginally in August as goods took a downturn. Spending rose 0.1%, following a downwardly revised gain of 0.4% in July. The annual pace of spending growth slowed to 5.0%, from 5.3%. The Reserve Bank of Australia cited a pickup in consumption as one reason it skipped a rate cut this week, and any slowdown could add to the case for easing. Other figures showed Australia’s trade surplus shrank to a seven-year low of A$1.8 billion ($1.19 billion) in August as exports of non-monetary gold dived 47% after a run of strong months. Imports rose strongly across the board, implying a risk trade will drag on economic growth this quarter. The RBA left its cash rate steady on Tuesday at 3.60%, citing recent data that suggested that inflation might tick higher than initially forecast in the third quarter. The central bank had forecast headline inflation, which ran at 2.1% last quarter, to pick up to 3.1% by the middle of next year. Markets imply around a 40% chance of a quarter-point rate cut to 3.35% in November and 60% for December.

INTEREST RATE MARKET FUTURES

Futures slipped lower at the front end and edged higher at the long end of the curve. Investor focus will linger around concerns to the extent the government shutdown persists. Given the fact that the debt ceiling is not attached, the shutdown could persist for longer. Dallas Fed President Logan (nonvoter, centrist) will speak this morning, taking part in a moderated conversation at the UT Evolving Energy and Policy Landscape Conference.

Yields fell on Wednesday after ADP’s weak employment data cemented expectations that the Fed will cut rates in October and added to expectations of a December rate cut. The report offered a surprise 32,000 decline in private-sector payrolls while also revising the previous month’s figures down sharply, resulting in three of the last four months showing negative job growth. Forecasts had anticipated an increase of 52,000. Fed Funds futures have fully priced in a rate cut at the October meeting and nearly an 86% chance of another cut following in December. In the absence of Friday’s labor report, which seems likely to get delayed, it is still likely that the Fed will cut interest rates this month. The shutdown also raises the risk that data for relevant economic figures could suffer from reduced quality, particularly with the inflation report, as the employees that the government relies on to collect the data are furloughed. Yields were little changed by the news that the White House cannot remove Fed Governor Lisa Cook while the case proceeds in court.

Yields bounced from local lows following ISM’s manufacturing purchasing managers index, which increased to 49.1 from 48.7 in August, signaling that activity remained in contractionary territory for the seventh straight month, although at a slower pace than previously. The data showed that the hiring category remained in contraction, with employers focused on reducing staff due to uncertain demand. Respondents also signaled they were more focused on tariffs dampening demand than on their causing inflation. Input prices eased slightly, although the gauge remained at historically high levels with the index slipping from 63.7 to 61.9. Survey respondents cited tariffs, high costs, and weak demand as key challenges, with many holding off on capital projects, cutting costs, and facing delayed orders, particularly in machinery, metals, and semiconductors.

For what it’s worth, forecasts expected nonfarm payrolls to rise by 51,000.

The spread between the two- and 10-year yields fell to 55.1 bps from 55.5 bps on Wednesday, while the 2-year yield, which reflects interest rate expectations, rose to 3.551%.

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