Yields Pull a U-Turn, Stocks Rebound as Weak JOLTS Sparks Rate Cut Enthusiasm: Sep. 3, 2025

Yields are pulling an aggressive U-turn with a weaker-than-expected intraday JOLTS report bolstering rate cut enthusiasm on the heels of Fed Governor Waller opining that multiple rate reductions are justified in the next few months. Global fixed income has suffered losses lately as unsustainable fiscal conditions around the world, uncertainties about inflation, legal challenges to US tariffs and to a lesser extent, quantitative tightening and heavy corporate bond issuance have driven interest rates north. And as most developed central banks are holding monetary policy steady or trimming levels of key benchmarks, international curves have ascended in bear-steepening fashion led by the long-end since shorter maturities have been supported by policymakers. But today’s stateside Treasury complex is reversing sharply in bull-flattening style, led south by duration, as dwindling job openings raise slowdown angst, essentially dialing down growth projections while ramping up Fed easing probabilities. Softer borrowing costs are helping stocks sustain their rebound after a favorable antitrust ruling for Alphabet strengthened tech optimism. Natural gas, silver and gold commodities are catching bids as well. Conversely, the greenback is lower on stronger bonds, volatility protection instruments are cheaper as traders breathe sighs of relief and crude oil is retreating on news that OPEC + is considering another production hike, potentially prioritizing market share over prices. Lumber and copper are losing value as well.

Demand for Labor Weakens

Labor demand dropped in July, according to this morning’s Job Openings and Labor Turnover Survey (JOLTS) from the BLS. For-hire signs fell to their lowest level since September as 7.181 million vacancies arrived well beneath the 7.4 million expectation and June’s downwardly revised 7.357 million. But the decrease was led by a 181k reduction in the non-cyclical health care and social assistance sector, which is a reason to not worry too much about employment conditions at this juncture. Another development justifying a glass half-full perspective is that Indeed’s gauge of help wanted postings has been on a steady climb since July 14, supporting the economic reacceleration theme despite JOLTS posting a steep decline. Meanwhile, quits were nearly unchanged at 3.208 million while the previous report was downgraded by 80,000.

September Cut Is in The Bag

Animal spirits are regaining traction during this seasonally weak September with this morning’s JOLTS report placing a Fed cut in the bag for this month. Indeed, the probability of a reduction is up to 96% today as investors are confident that the central bank will defend labor conditions amidst inflation hovering in the mid 2s. Furthermore, it’s probable that cost pressures will recede closer to the monetary policy authority’s target of 2% in a few months once the base effects of initial tariffs are set, justifying incremental accommodation here and now. Still, we have a lot of data to comb through until the decision is made at the meeting on the 17th, namely nonfarm payrolls and the Consumer and Producer Price indices. Market participants are eagerly awaiting those results as they will certainly influence the pace of the Fed’s walk down the stairs. Finally, the chances of October and December are likely to shift meaningfully as we progress throughout the page of this calendar, with hotter numbers pulling those possibilities lower, while cooler figures would drive them higher. But for jobs, statistics that are too weak could raise slowdown fears, although I don’t think the path for employment growth falling below 50k is particularly wide here against the backdrop of evidence supporting a reaccelerating economy.

International Roundup

Australia Economic Growth Exceeds Estimates

Australia’s economy grew 0.6% quarter over quarter (q/q) and 1.8% year over year (y/y) in the May through June period, exceeding estimates for 0.5% and 1.6%. Growth also accelerated from the 0.3% q/q and 1.4% y/y results of the first quarter. In releasing the data, the Australian Bureau of Statistics also said that GDP is now estimated to grow 1.3% during the current fiscal year. The headline q/q result was supported by government spending jumping 1% with outlays for social benefits rising. The federal election also caused government spending to climb. On a positive note, a 0.9% increase in household consumption pushed the headline result up after expanding only 0.4% in the preceding period. The discretionary spending portion was the strongest, up 1.4%, after a slower 0.5% gain in the first three months of the year.

Retailers increased their use of discounts and other incentive to finish their fiscal years on a strong note, according to ABS Head of National Accounts Tom Lay. Growth in shipments of iron ore and natural gas to other countries, furthermore, resulted in exports contributing 0.1 percentage point to GDP. Exports of services also strengthened.

Wholesale Price Increases Ease in Europe

Wholesale prices in the euro area climbed 0.4% month over month (m/m) and 0.2% y/y in July, faster than estimates for 0.2% and 0.1% increases but slower than the 0.8% and 0.6% rates recorded in June, according to the Producer Price Index.

Energy costs were 1.5% higher relative to June while durable consumer goods and capital goods costs grew 0.2% and 0.1% more. At the same time, intermediate goods fell 0.2%.

Singapore’s Expansion Slows

Singapore’s economy expanded for the seventh-consecutive month in August, but the growth slowed from the July’s pace, according to the S&P Global Purchasing Managers’ Index. At 51.2, the gauge remained above the contraction-expansion threshold of 50 despite descending from 52.7 in July. The pace of growth for new orders and business activity slowed, lead times expanded and input costs continued to move North. Employers also shed workers and lowered charges for their products.