Another miss for the NFP report

Daniel Richards - MENA Economist
Published Date: 11 October 2021


  • September’s non-farm payrolls report posted another big miss, coming in at 194,000, far short of the consensus projection for a half a million net gain. And while the August figure was revised up from 235,000 to 366,000, that remained far below the initial expectations also. These two consecutive weak jobs numbers make the Federal Reserve’s job more difficult, as it is more in question as to whether the substantial further progress in the labour market is indeed being met, although they are probably just enough to keep signposted tapering plans on track given that some pandemic-related pressures are easing. Unemployment did take a substantial step lower, dropping from 5.2% to 4.8%, but this was partly a reflection of a further fall in the participation rate. Hospitality and leisure added only 74,000 new jobs, likely reflective of ongoing health concerns while Covid-19 cases remained high in the US. Meanwhile, initial jobless claims in the week to October 2 fell to 326,000, beating projections of 348,000.
  • The UAE has announced a net-zero carbon emissions target for 2050, the first among Middle East economies and one of the first major exporters of hydrocarbons to make a pledge to reduce emissions to net zero. The move comes ahead of Cop 26 at the end of October and early November when more global governments are expected to enhance their climate change mitigation targets. The UAE will still be able to increase production of oil and gas domestically under a net-zero target provided that it makes compensatory investments into technologies like carbon capture and storage or moves more of its power mix away from natural gas and toward renewables or nuclear. The target for net-zero emissions won’t, however, account for emissions produced in the combustion of UAE-exports of hydrocarbons in other countries.
  • 136 countries around the world, including the UAE and most GCC countries, have signed up for a new global tax deal, due to come into action from 2023. The first pillar concerns the largest multinational digital firms, and ‘will re-allocate some taxing rights over MNEs from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there.’ The second pillar of the agreement will see firms with revenues of over EUR 750mn have to pay a flat 15% tax in the country in which they are operating and generating profits.
  • The Reserve Bank of India kept its benchmark repo rate on hold at 4.0% last week, in a widely anticipated decision. While the central bank did taper some of its QE, a rate hike remains unlikely for now given moderating inflation and its preference for accommodative policy.
  • CPI inflation in Egypt accelerated more rapidly than anticipated last month, rising by 6.6% y/y, up from 5.7% the month previous. Core inflation rose to 4.9%, from 4.5% in August. Food and drink prices, which rose 10.6%, were the key driver of the acceleration which was at the fastest pace since January 2020. Nevertheless, the inflation rate remains within the CBE’s target levels, and while a rate cut remains as unlikely as before, we do not anticipate a hike this year either.

Today’s Economic Data and Events

  • No major data releases today
  • US markets are closed today

Fixed Income

  • US Treasuries initially rallied on the big miss in the September non-farm payrolls report but then quickly reversed those gains as the markets digested the full impact of the data. Yields ended the day up smartly as the data appears not to have been bad enough to derail the Federal Reserve’s plan to begin tapering of asset purchases from November.
  • Yields rose across the curve last week and were steadily inching higher even ahead of the assessment of Friday’s NFP print. On the 2yr UST, yields closed at 0.3178%, up more than 5bps on the week and their highest level since March 2020. For the 10yr, yields added 15bps last week and closed out at 1.6118%. The 2s10s curve has subsequently bear steepened to almost 130bps.
  • Rising inflation breakevens have largely been pulling 10yr yields higher in the past month as markets grow more anxious that inflation in developed markets won’t be as transitory as central banks have been messaging. Real yields have also started to climb in the last few weeks with the 10yr TIPS yield rising around 2bps last week to -0.898%.
  • Bond markets generally continued to give ground last week with European benchmark bonds falling a seventh week in a row and emerging market USD-bonds declining for four weeks on the run. Yields were higher on long-end bonds in Europe with 10yr bund yields gaining 7bps to -0.152% and gilts up almost 16bps to close solidly above the 1.10% level.
  • The gain in UST yields, though, continues to pummel emerging market local currency bonds. Yields were higher nearly across the board with Indian 10yr government bond yields up 7bps to 6.317%, South African 10yr yields up almost 26bps to 9.849% and Turkish 10yr yields up almost 22bps to 17.915%. With the Fed likely on a clear path to less accommodative policy, data misses notwithstanding, the near-term outlook remains poor.
  • For central banks this week, South Korea decides on Oct 12, Morocco meets on Oct 13 while Sri Lanka will set rates on Oct 14. South Korea raised rates at its July meeting by 25bps to 0.75% but market expectations are for a hold this week.
  • Egypt has launched its USD 2bn ESG term loan and Islamic term financing facility. The ESG tranche will be directed towards green projects, with the Islamic facility directed towards budgetary needs.


  • The dollar remained bid last week although the weaker than expected NFP clouded the picture somewhat. The DXY index added 0.03% last week to settle just above the 94 level. A test of 94.5 would be the next objective for the dollar to remain broadly supported against peers.
  • The source of gains for the dollar was a bit more mixed last week, however, with EURUSD off by 0.2% to settle at 1.1569. That at least represented a far smaller depreciation than a week earlier. ECB president Christine Lagarde noted to the press last week that a “premature” tightening of policy would harm the eurozone economy.
  • USDJPY provided a substantial share of the dollar’s gains last week, with the pair up more than 1% to settle at 112.24. A survey of economic conditions by the BoJ revealed that most regions of Japan were doing worse now than they were three months ago, limiting the ability of the BoJ to adjust policy anyway toward tightening.
  • GBPUSD managed to snap its recent losing streak and gained 0.5% last week to close at 1.3615. Despite data in the UK turning sour, Michael Saunders, a BoE MPC member, said it was “appropriate” that markets have priced in a faster tightening cycle than they were previously. As inflation is biting in the UK, the BoE may be the next among major central banks to tighten policy.
  • In the commodity currency space USDCAD fell in favour of the loonie by 1.4%, closing out at 1.2472.A jobs report for September showed that Canada has recovered all jobs lost since the start of the Covid-19 pandemic after 157k jobs were added in September. Elsewhere, AUD rose 0.7% to 0.7309 last week as the RBA kept policy largely unchanged while NZD fell 0.13% to 0.6939 despite the RBNZ hiking rates at its meeting last week.


  • Equity markets had a somewhat better week last week than previous, with most major indices gaining as some risk factors dissipated with the debt ceiling compromise and the announcement by Russian President Vladimir Putin that he would boost gas production.
  • In Europe the FTSE 100 was the major gainer, adding 1.0% w/w with a 0.3% gain on Friday, despite the Bank of England cautioning about the risk of an inflation-driven financial market sell-off. Elsewhere, the CAC closed up 0.3% w/w, trailing Germany’s 0.7%. Both indices lost ground on Friday.
  • In the US, all three major indices ended the week up, but some of those earlier gains were erased by the weaker-than-expected jobs report released on Friday. The NASDAQ clung on to gains of 0.1% w/w, while the S&P 500 and the Dow Jones added 0.8% and 1.2% w/w respectively.
  • In India, the RBI’s ongoing commitment to accommodative monetary policy was supportive of equity markets last week. The Nifty (2.1% w/w) and the Sensex (2.2%) both closed higher.
  • The standout loser across global equity indices last week was Japan’s Nikkei. The index had been on a tear following the announcement of Prime Minister Yoshihide Suga’s resignation, but that momentum has fizzled out as his successor Fumio Kishida was announced. His speech detailing a ‘new form of Japanese capitalism’ last week spooked investors worried about tax hikes, and the key index is down -2.5% w/w and -8.6% from its recent high.


  • Energy commodities generally remain on a tear with markets still pricing in considerable near-term tightness. Brent futures added 3.9% last week to close at USD 82.39/b while WTI managed gains of 4.6% to close at USD 79.35/b, having broken briefly above USD 80/b at the end of the week. Front month time spreads remain high with 1-2month Brent closed at almost USD 0.60/b last week while the same spread in WTI settled at USD 0.70/b.
  • Oil market conditions this week will be set by reports out from the EIA, OPEC and IEA where the recent run in energy prices will be in focus. 
  • Natural gas prices took a breather, however, as the market reacted to suggestions that Russia could deliver more volumes into Europe. UK pricing fell around 12% last week while Henry Hub futures closed down by almost 1%. However, there has been no material agreement reached yet on sending additional flows in to the European or UK gas systems.
  • Metals prices were higher across the spectrum with the exception of gold. Spot gold prices fell 0.2% last week to settle at USD 1,757/troy oz even as inflation globally remains high. Investors have pulled out of gold ETFs for three weeks running with total holdings at their lowest level since May last year.

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