Focus on US jobs data

Major European and US indices attempted a recovery yesterday as long-dated yields eased, providing some relief. Tech led the rebound, with the Magnificent 7 up 2%. Alphabet jumped 9% after the DoJ announced that Google can keep Chrome, but it will have to share online search data with its competitors. That was SUCH a relief for Google, as losing Chrome would mean losing the major interface of the company and would cost Google massively. No wonder, Google shares soared to a fresh ATH level. Apple also gained 3.8% after a judge declined to bar its lucrative search arrangement with Google. Taken together, the rulings were read as a sign that US courts may remain friendlier to tech giants than feared under Trump administration. Yet, these companies are trading at sky-high valuations already – meaning that the anti-trust probes did little to shed value in the past. Investors are increasingly worried that some of these names have become... too expensive. Expensive or not, many investors in these big names have hard time finding exciting alternatives, explaining why investors keep piling into these stocks despite sky-high valuations.

The main story remains the global bond selloff. Sovereign bonds in developed economies are under pressure, with long-maturity yields near multi-decade highs on the back of ballooning debt, political obstacles to fiscal tightening and structurally higher inflation. To finance higher debt servicing costs, governments are issuing more bonds — further pushing yields higher. The US 30-year yield briefly tested the 5% psychological level before retreating, while a softer-than-expected JOLTS report — with job openings falling to a one-year low — reinforced expectations of a slowing labour market. The US 2-year yield fell to its lowest this summer, with futures pricing a 95% probability of a September 25bp Fed cut. Markets now await ADP data today and nonfarm payrolls Friday to confirm the trend. A soft ADP read today and weak official jobs data on Friday could further support this trend and pull yields lower. We’re yet to see whether the steepening of the yield curve will slow, now that the 30-year bond offers around 5%. Upcoming rate cuts could boost medium- to long-term inflation expectations and keep the long end under pressure. Indeed, the 2-year yield is pushing lower, while the 30-year yield shows a modest rebound this morning.

Softer Federal Reserve (Fed) expectations keep the US Dollar under pressure. Gold extended its rally to fresh record levels around $2’500/oz, supported by a weaker dollar and growing concerns over sovereign debt sustainability in developed markets. Many EM central banks are expected to continue diversifying away from US Treasuries into gold — an asset not subject to government creditworthiness or sanctions risk, as highlighted by the freezing of Russia’s reserves in 2022. This trend could accelerate if Fed independence comes under pressure from political attacks.

That raises the question: could Bitcoin serve a similar role? Like gold, it has no government issuer. But the US increasingly seeks to position itself as a crypto hub, which could politicize the asset. In a sharper West–Rest divide, emerging-market populations — who make up an estimated 60–70% of global crypto holders — may face pressure on their dollar-denominated Bitcoin holdings, potentially weighing on adoption.

In Europe, benchmark 10-year yields eased despite political turbulence in France, where another government collapse looms. Japanese 20- and 30-year yields also pulled back slightly from multi-decade highs.

The bond selloff will likely stabilize once yields are seen as attractive enough to draw buyers back into sovereign debt. But we may see a further selloff before rebound.