Morning Bid: Entering the home stretch

This week, nervous bond markets brace for another crucial test as they approach the month's end and the third quarter's final days on Wednesday, with the September US employment report scheduled for Friday. Oil prices have risen, pushing over $108 per barrel, following President Trump's rejection of Iranian proposals to reopen the Strait of Hormuz and end regional fighting. The resolution of the seven-month crisis appears unlikely before the November US midterm elections.

The end of a turbulent third quarter may trigger erratic portfolio adjustments early in the week. However, September payrolls data on Friday and the monthly labor market updates preceding it will likely remain the primary focus. Consensus forecasts anticipate a job growth of 84,000 in September, though slightly lower than August's figure. This remains substantially higher than the breakeven estimate required to maintain the unemployment rate steady at 4.1%.

With a two-thirds probability of another Federal Reserve rate hike in the following month now priced into futures markets, Fed speakers are under close scrutiny. All voting Fed policymakers who have spoken since the unanimous rate hike decision in the current month have adhered to the script of further tightening being necessary. Any deviation from this stance by senior figures could impact market sentiment.

In other developments, the US-China summit last week failed to generate significant market follow-through, despite some tariff relief on selected goods and an extension of the trade truce until January. Meanwhile, Chinese industrial profit numbers declined in August, as reported. In the United States, nonfarm payrolls are projected to have increased by 84,000 this month, keeping the unemployment rate unchanged at 4.1%, according to Reuters consensus forecasts.

August payrolls exceeded expectations, rising by 162,000, doubling the average monthly job gains of 71,000 over the three months preceding August.