Macroeconomic Outlook for Next Week: Fed Minutes to Reveal December Rate Hike Divergence, G7 Oil Reserve Release to Focus on Lowering Oil Prices

On October 3, the U.S. added only 29,000 non-farm jobs in September, far below the market expectation of 90,000, and the August data was revised down by 133,000. The unemployment rate rose to 4.2%. Following the non-farm report, market expectations for a Fed rate hike in October cooled significantly. According to CME's "FedWatch," the probability of maintaining the current interest rate in October rose to 83.9%, while the probability of a rate hike in December stands at 66.1%. Meanwhile, the yield on the 10-year U.S. Treasury bond briefly rose to 5.36%, and the dollar index reached a 17-month high.

Next week, market focus will be on the Fed's September meeting minutes, the G7's strategic oil reserve release, long-term U.S. Treasury yields, and the U.S. ISM Non-Manufacturing PMI, among other events.

From the Fed's perspective, the September meeting minutes will be released at 2 AM Beijing time on Thursday. As the market shifts its focus from "whether to hike in October" to "whether to hike in December," discussions in the minutes regarding inflation and employment risks, officials' divergences on further rate hikes or pauses, and whether the wording is more hawkish or dovish compared to post-meeting speeches will be key highlights. Additionally, Fed Governor Bowman and St. Louis Fed President Bullard will also speak next week.

In the bond market, the U.S. Treasury will announce the scale of buybacks for 20 to 30-year bonds and conduct auctions for 10-year and 30-year bonds. The yield on the 10-year U.S. Treasury bond is currently at a 20-year high, and the scale of Treasury buybacks and demand for bonds will be important variables to observe the trend of long-term yields.

In the energy market, the G7 agreed to release 100 million barrels of oil and diesel reserves to alleviate energy supply pressures. The International Energy Agency will coordinate the related supply. Meanwhile, the market expects OPEC+ to maintain its November production target, but disruptions in shipping and energy infrastructure around the Strait of Hormuz have not been completely resolved, and oil prices may continue to experience high volatility in the short term.

Regarding gold, despite the weak non-farm report lowering expectations for a recent Fed rate hike, gold prices failed to maintain their upward trend, with spot gold falling nearly 2% this week. The market is still under pressure from rising U.S. Treasury yields, and whether gold can regain momentum next week will depend on changes in long-term rates and geopolitical developments.

In terms of data, the U.S. ISM Non-Manufacturing PMI for September will be released at 10 PM on Monday, with market expectations at 55.1; the preliminary Michigan Consumer Sentiment Index for October will be released on Friday, with expectations at 47.6. Additionally, the European Central Bank will release the minutes of its September meeting, Bank of Japan Governor Ueda will speak, and the Reserve Bank of India will announce its interest rate decision.

In the U.S. stock market, next week enters a gap period before the third-quarter earnings season, and the impact of macro variables on market pricing may further increase. The market will continue to focus on the impact of AI capital expenditures, energy costs, and financing conditions on corporate profits, while whether the 10-year U.S. Treasury yield can retreat from its 20-year high will remain an important variable for the valuation of growth stocks and the performance of risk assets.

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