Strong employment data changes course in financial markets

Strong US employment data released last Friday dramatically changed the mood in financial markets. The report showed that the economy created 100,000 more jobs than expected, forcing investors to reconsider expectations for lower interest rates.

Previously, the calculation of lower rates supported rising Treasury bond prices and a weakening dollar, as well as stimulated an upswing in sectors such as utilities. New data indicates that the Fed may start cutting rates more slowly than expected. Federal funds rate futures have already ruled out the possibility of another 50 bp rate cut at the Fed's November meeting.

The dollar reached a seven-week high, and Treasury yields rose to 3.985%, which also indicates a revision of expectations. Investors can switch from hedging to additional stock market growth opportunities. The S&P 500 index rose 0.9% and approached a new high.

Nevertheless, a sharp rise in bond yields may reduce the attractiveness of stocks. In the medium term, positive employment data should help improve economic growth expectations and support risky assets.