Market Reaction to US Labour Report

• Markets shifted to a risk-off tone on Friday following a significantly weaker-than-expected Nonfarm Payrolls Report.
• Headline jobs growth rose by just 73k in July, while the unemployment rate ticked up to 4.2%. Notably, May and June were revised sharply lower, by a combined 258k.
• The 3-month average payroll gain has slowed to just 35k, down from over 230k at the start of the year, highlighting a clear softening in labour demand.
• Bond markets reacted strong, the US 2-year yield fell 27bps, while the market moved to price in an 88% chance of a September rate cut (up from 40% pre-release) and 60bps of easing by year-end. The 10-year yield dropped 16bps.
• In a dramatic political response, Trump fired the head of the Bureau of Labor Statistics, stating the agency’s data “can’t be manipulated for political purposes.”