- Equities in the US sold off on Thursday as investors grew concerned about the AI industry.
- Economists believe the US economy added 65,000 new jobs in October.
- The US election results lowered the likelihood of an escalation in the Iran war.
Interest futures gained on Thursday amid a migration to safe-haven assets due to a selloff in the US tech sector. The move came amid AI worries and as market participants grew cautious ahead of the non-farm payrolls report. At the same time, the US midterm election outcome lowered the likelihood of an escalation in the Iran war, sending oil prices and yields lower.
Equities in the US sold off on Thursday as investors grew concerned about the AI industry. At the same time, traders grew cautious ahead of the monthly employment report. Economists believe the US economy added 65,000 new jobs in October, up from 29,000 in the previous month. Meanwhile, the unemployment rate will likely hold at 4.2%.
A stronger-than-expected reading will give the Fed enough room to hike interest rates next year, sending interest futures lower. On the other hand, an unexpected slowdown in the labor market would increase caution among policymakers. Such an outcome would be bullish for bonds.
Elsewhere, traders are still absorbing the outcome of the midterm elections, where Democrats led in the House and Senate. Soon after the results, Vice President JD Vance blamed the Iran war for their loss. The outcome has weakened Trump’s power to pass unpopular policies. For months, there have been calls to end the Iran war, which has cost the country a lot of money.
10-year yield (Source: Bloomberg)
Trump maintained a hard stance that prolonged the war. However, experts now believe pressure from the Democrats to end the war will increase. As a result, oil prices and Treasury yields collapsed while interest futures gained.
Furthermore, even before the election results, hopes for a resumption of negotiations between the US and Iran had sent oil prices lower. Top officials in government assured markets that Trump was looking to end the Iran war using diplomacy. Moreover, the president said on Tuesday that he had no immediate plans to attack Iran.
Nevertheless, the risk of an escalation remains. As long as there is no long-lasting peace deal, the two nations could start exchanging missiles. On the other hand, if talks resume, the hope of a deal will keep oil prices subdued.
