* Key Fed inflation rate hits 2.1% in September, EZ inflation rebounds to 2%

* 10-year Treasury yield inches higher ahead of US jobs report

* Tech earnings mixed as Amazon jumps while Apple slips after hours

* Stocks tumble for a second day, dragged lower by Microsoft and Meta

FX: USD mildly weakened and the DXY retreated beneath the 104.00 level amid pressure from a firmer yen and euro. The latest data releases were mixed as most PCE Price metrics matched estimates. But employment costs were slightly softer than expected and weekly initial jobless claims dropped. Attention now turns to today’s key US non-farm payroll jobs data.

EUR was firmer for a fourth consecutive day following firmer-than-expected inflation data.  Price moved up to the 21-day SMA at 1.0874. Eurozone CPI rose 2.0%, a little above the forecast 1.9% and September’s 1.7% print. The data helped sway market pricing further towards a 25bps ECB cut in December with 29bps of easing now priced in, versus 31bp previously.

GBP was again the big underperformer, moving briefly below 1.29. Gilts remained pressured in a continued fallout from the UK Budget announcement. The pound was set for its worst loss against the euro in two years. Investors are now worried the tax-and-spend budget could reignite inflation but weigh on growth. The halfway point of the April move higher sits at 1.2862.

JPY outperformed with the major attempting to break beneath the 152 level. That came in the aftermath of the BoJ policy decision and Governor Ueda’s press conference where he downplayed concerns over financial stability risks acting as a barrier to further rate hikes.

AUD picked up for a second day as it traded around a major Fib level (61.8%) of the August/September bull move at 0.6574.  USD/CAD saw more buying up to 1.3944, again just shy of the August spike high is 1.3946. Soft risk appetite didn’t help.

US Stocks broke downand closed firmly in the red. The S&P 500 settled 1.86% lower at 5,705. The tech-dominated Nasdaq 100 lost 2.44% to finish at 19,890. The Dow finished down 0.90% at 41,763. Meta and Microsoft closed down 4.1% and 6.05% respectively after warning of rising costs for AI. But futures in the Nasdaq and S&P 500 are positive after Amazon and Apple reported after the closing bell. The former posted Q3 profit and sales that beat estimates, while Apple beat expectations on higher iPhone sales but took a one-time $10bn charge in the quarter after EU tax ruling. Consumer Staples, Energy, and Utilities were the only sectors in the green.

Asian stocks: Futures are negative. Asian stocks were mixed heading into month-end on a subdued Wall Street and mixed China PMIs. The ASX 200 dipped after Coles was under pressure following its quarterly update. The Nikkei 225 dropped below the 39,000 level on mixed data and a marginally more hawkish BoJ meeting. The Hang Seng and Shanghai Composite were bid on strength and profit growth in China’s big four banks. PMI data showed manufacturing activity topped estimates and printed at a surprise expansion but non-manufacturing missed forecasts.

Gold dropped over 1.5% and below last week’s high. That was the biggest single day decline since July and comes after bullion has gained close to 35% since January. A future inflationary path caused by Trump 2.0 has seen a phenomenal bull run.

Day Ahead – NFP Day

Consensus currently estimates that 120,000 jobs were added to the headline non-farm payrolls in October, while the unemployment rate is expected to stick at 4.1%. The latest Fed projection saw that figure at 4.4% by year end, with just one more report to come. Wage growth should also be more muted after the surprise jump to 0.4% in September and is seen slowing to a relatively benign 0.3% m/m. As we often say, watch out for revisions to the headline print, which can spark volatility to price action.

The underlying employment trend has been tough to work out lately due to wide swings in the data, especially after last month’s blockbuster 254,000 increase. This time around, hurricanes and strikes will be one-off factors that again cloud the longer-term trends. The Boeing strike, which economists reckon affects 35-40,000 workers, should impact manufacturing, with likely knock-on effects on suppliers. Hurricanes in the south-east have impacted worker’s ability to get to their place of employment.

Chart of the Day – EUR/USD trying to bounce

A “noisy” NFP report due to the weather and strike distortions could mean markets struggle to find a clear direction with volatility highly probable. A 25bps rate cut in November is very likely and further softening in jobs will keep the Fed cutting again in December. We may have to wait for fresh “cleaner” data over the next few weeks to determine the size of that cut. Of course, a stronger than expected report would be the big surprise.

Eurozone data has recently perked up very modestly and helped two-year EZ/US spreads narrow, so supporting the euro. ECB rate cut bets have also been pared back. The 50% retrace of the April upward move is 1.0903. A strong base looks to have formed below 1.08.