Global equity markets started the week with robust gains as economic data pointed to a possible slowdown in monetary tightening by global central banks. Some of those gains pared back as the week progressed, particularly as the U.S. jobs report raised expectations that the U.S. Federal Reserve Board would remain aggressive. The S&P/TSX Composite Index advanced, led by gains in the Energy sector. In the U.S., the S&P 500 Index climbed higher, boosted by the strong performance of the Energy sector. The Energy sector on both sides of the border advanced due to rising oil prices as the Organization of the Petroleum Exporting Countries (“OPEC+”) announced significant production cuts. Yields on 10-year Government of Canada bonds rose, while those in the U.S. were largely unchanged.
Canada adds more jobs than expected
The Canadian economy added just over 21,000 jobs in September, above the 20,000 job additions economists estimated.
Both part- and full-time work added jobs in the month. Employment increased significantly in the educational services and social assistance industries.
The unemployment rate fell to 5.2% in September from 5.4% in August.
Meanwhile, average hourly earnings increased in September, while the participation rate ticked lower. The results suggest the labour market in the Canadian economy is still fairly tight.
Outlook a bit uncertain
The jobless rate in the U.S. ticked lower in September to 3.5% from 3.7% in August, matching economists’ expectations.
The economy added 263,000 jobs during the month, and despite the positive number, it was the lowest level since the second quarter of 2021.
Still, the data suggested the labour market remains relatively tight.
The outlook for the U.S. labour market, however, is uncertain. Challenger, Gray and Christmas Inc. reported that U.S.-based companies announced 29,989 job cuts in September, an increase from 20,485 in the previous month.
The job cuts might suggest companies are looking to scale back staffing levels amid slowing economic conditions and tighter financial conditions.
OPEC+ to cut production
At its October meeting, OPEC+ agreed to reduce oil production by 2 million barrels per day. The oil cartel hopes the move will help support oil prices, which have fallen in recent months.
However, the actual drop might be lower than estimated as many members are currently producing below their targets.
The U.S. federal government opposed the decision, hoping oil prices would continue to ease and relieve U.S. consumers amid surging inflation.
Following the announcement, investors grappled with how it might affect inflation and future central bank moves.
European business activity contracts
According to a final reading from S&P Global, European business activity contracted for the third consecutive month in September.
The decline came as the region grapples with higher prices, rising rates, geopolitical tensions and an energy crisis.
Activity across the service and manufacturing sectors contracted at a sharper pace in September over August, mainly due to weaker demand.
The manufacturing sector was hindered by a drop in new orders and output, while the service sector suffered from a decline in backlogs of work, with intensifying price pressures.
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