Overview
The US added only 29,000 nonfarm payrolls in September, far below the 90,000 consensus, with the unemployment rate edging up to 4.2%; August core PCE rose 3% year-on-year and 0.2% month-on-month, both below expectations. Following the data, CME FedWatch showed the probability of an October hike plunging from over 50% to below 22%, while the odds of a hold at the late-October FOMC rose to about 80%. Meanwhile, by end-September the US 10-year yield reached 5.28% versus China’s roughly 1.68%, pushing the China-US spread beyond 330bp—a record.
Background & Interpretation
1. Macro and Policy Context
A central tension in 2026 global markets is the elevated US rate base. Although weak payrolls and PCE weakened the case for another hike this year, most officials still expect one more hike before year-end and two in 2027, meaning the “sword of rates” remains. Global allocation has rebalanced visibly toward equities: global equity funds posted 29 straight months of inflows, with September alone seeing USD93.42bn, at the 90.1th percentile of the past decade.
2. Core Drivers and Underlying Mechanism
Weak data directly repriced October hike odds, yet the long end kept rising, with the 10-year briefly at its highest since 2002. Under a strong dollar and high long-end rates, the breadth of the global equity rally is narrowing except for AI value chains with clear earnings support. The widening China-US inversion should, in theory, pressure the RMB via capital outflows—but reality diverged.
3. Market Structure and Value-Chain Impact
The offshore RMB hit 6.69129 on Sep 21 and stayed strong through the holiday, underscoring China’s “domestic-priority” monetary stance backed by easing expectations and fundamental resilience. For A-shares, the marginal easing of external tightening, plus post-holiday PBoC net injection, could lift risk appetite from lows—especially liquidity-sensitive STAR and ChiNext names.
Implications & Outlook
Near-term, eased hike expectations favor risk assets, particularly rate-sensitive tech-growth; but a strong dollar and high long-end rates remain an overhang. Watch the FOMC’s actual tone, whether US yields retreat, and the persistence of RMB strength.
Takeaways for Industry Participants
- Exporters should optimize FX settlement and hedging around the currency window;
- Equity investors can seek valuation repair from easing external liquidity but manage duration risk;
- Fixed-income allocations must guard against high long-end rate volatility.
This column compiles industry information and shares technical perspectives; it does not constitute investment advice.