Diesel hits £2 a litre for first time; eurozone inflation rate surges to 3.8% – business live

After a choppy week, the UK stock market has closed with a small daily gain.

The FTSE 100 index has ended the session up 33.7 points or 0.3% at 10,461 points. Mining stocks were among today's risers.

But for the week, that still leaves the Footsie down 2.18%, its biggest weekly drop since mid-April.

The odds of the Federal Reserve raising interest rates at its next meeting later this month have dropped today.

According to CME Fedwatch, an October rate hike is now only a 20.5% chance.

That's down from 24.4% yesterday, and 64% a week ago when the markets were much more confident the Fed would tighten policy.

In another boost to the financial markets, the G7 have agreed to release as much as 100 million barrels of emergency oil and diesel stocks.

The move follows pressure from the Trump administration to quell rising fuel prices. If it works, then it will remove some of the inflationary pressure that has pushed up bond yields this week (before today's recovery).

Emmanuel Macron, France's president, says the release will take place over the next four months. It is being coordinated by the International Energy Agency.

A statement released by Macron's office, says:

“We will implement our commitments with a coordinated release through the IEA of 100 million barrels to begin immediately over 4 months, including a frontloaded substantial diesel release within the first 20 days by G7 members and partners.â€

Our Europe Live blog has more details:

Newsflash: America's technology stock index has hit a record high, as traders express relief that today's jobs report might dampen the pressure to raise US interest rates.

The Nasdaq Composite has jumped by 1.6% in early trading in New York.

Rocket Lab (+7.4%) are leading the risers, followed by UK-based chip designer ARM Holdings (+6.9%).

Stocks are up more broadly, with the S&P 500 index rising by 1%.

Susannah Streeter, chief investment strategist at Wealth Club, explains why the slowdown in hiring across the US economy last month has cheered investors:

‘'There's been a ripple of relief on financial markets as hopes rise that the Fed won't have to go so hard and fast in raising interest rates. Treasury and gilt yields have eased off, and equity markets are on a rising tide, as the rush of worry has started to recede.

The latest US jobs figures came in weaker than expected, with just 29,000 jobs added in September, compared with forecasts of around 90,000. That's a marked slowdown, although some of the weakness reflects a fall in government payrolls. But pay packets indicate that employees don't have the upper hand in demanding higher wages, with hourly earnings rising by just 0.1% over the month, taking annual wage growth down to 3%, its lowest rate since the pandemic.

The figures suggest the jobs engine is losing a little steam, but isn't spluttering to a halt, so the snapshot has been greeted as a dose of better news and a sign that the Fed may be a tad more wary about hiking borrowing costs.

Here’s Nancy Vanden Houten, Lead US Economist at Oxford Economics, on today's nonfarm payrolls data release:

The softer than expected September employment report makes a rate hike at the October meeting a closer call. However, we think the upside risks to inflation are still a bigger concern for the Federal Reserve and expect they will raise rates at the end of the month.

Nonfarm payrolls rose 29,000 in September and there were downward revisions to job gains for July and August. Still, on a trend basis, job growth is well in line with our estimate of the breakeven pace of job growth.

The unemployment rate edged up to 4.2% in September as the prime-age labor force participation rate continues to recover some of the plunge that occurred in June. Looking ahead, we expect the unemployment rate to hold steady around 4.2% with the risk skewed to the downside as labor force growth continues to slow.

An October hike in US interest rates is now “firmly on the back footâ€, predicts Seema Shah, chief global strategist at Principal Asset Management:

“A softer-than-expected jobs report should put an October Fed hike firmly on the back foot.

Weaker payrolls, softer wage growth and a higher unemployment rate all point to a labour market that's cooling rather than reaccelerating. That should take some steam out of Treasury yields and reduce the urgency for the Fed to act. CPI remains the decisive release, but today's data argues for patience, not panic. The Fed needs to see a reacceleration in inflation, not just resilience in growth, to justify another hike this year.â€

Here's Bradley Saunders, North America economist at Capital Economics, on today's jobs report:

The softer employment gain and tick up in the unemployment rate in September is not enough to spoil the image of a labour market which is broadly performing well, though it may help to trim investors' expectations for how far the Fed will eventually tighten back towards our view for two more rate hikes.

The 29,000 rise in non-farm payrolls in September was notably weaker than the consensus 90,000 estimate, but not disastrous. A 17,000 drag in government payrolls was partly to blame. Meanwhile, the softer 23,000 rise in healthcare & social assistance payrolls rose may be linked to the Trump administration's recent decision to rescind Temporary Protected Status (TPS) and working authorisation for 350,000 migrants.

US workers' average earnings growth has also slowed, which is not good news for Donald Trump ahead of next month's midterm elections.

Today's jobs repot shows that in September, average hourly earnings were 3.0% higher than a year ago, down from 3.1% in August.

Nic Puckrin, a former Goldman Sachs analyst, explains:

“Today's ice-cold report shows the jobs market may not be as healthy as previous data might have suggested. Wage growth is more anaemic than expected at 3%, while payrolls came in well below expectations at 28,000, with August also revised down.

This is a fly in the ointment for the Fed: it's forcing the central bank to choose between two evils. Hike again, and you risk tipping the scale on unemployment at a time when Americans are already struggling with the cost-of-living crisis. Hold, and inflation could get out of control.

The US dollar is edging lower against some other major currencies.

It's down by 0.5% against the Japanese yen, to ¥157.23/$.

It's also lost 0.15% against the pound, which has risen to $1.322.

The dollar index, which tracks the greenback against a basket of other currencies, is down 0.25%.

Wall Street is set to rally when trading begins in 45 minutes, as today's weak jobs report cools some fears of future interest rate rises.

The Dow Jones industrial average is forecast to rise by 0.85%, according to futures market pricing, with the tech-focused Nasdaq 100 up 1% in pre-market trading.

Today's weak US jobs report is bringing some comfort to the bond markets!

The prices of US Treasuries are rising, which is pulling down the yield (or rate of return) on these bonds away from the multi-year highs set earlier this week.

The yield on 10-year US Treasuries has fallen by 6 basis points (or 0.06 of a percentage point) to 5.174%. That pulls it away from the 24-year high recorded yesterday.

30-year US Treasury bonds are recovering too; the yield here is down by 4.5bps to 5.568%.

That's not because bond investors like the sound of Americans strugging to find work. It's because it will be harder for the US Federal Reserve to raise interest rates, to fight inflation, if the jobs market is weakening. The Fed has a dual mandate – to deliver price stability and full employment.

Health care continued to be a creator of jobs last month – hiring increased by 17,000 in September, including gains at ambulatory health care services and in hospitals.

Employment in construction rose by 11,000

Manufacturing employment rose by 9,000.

But financial activities fell by 7,000.

The BLS adds:

Employment also showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; wholesale trade; retail trade; transportation and warehousing; information; professional and business services; social assistance; leisure and hospitality; other services; and government.

Newsflash: the US economy added much fewer jobs than expected last month, after a sharp slowdown in hiring.

Nonfarm payroll employment rose by just 29,000 last month, the US Bureau of Labor Statistics has reported.

That's much weaker than the 90,000 new jobs which economists had expected.

The BLS says:

Employment in all major industries changed little over the month.

In another blow, August's jobs report has been revised down to show that 29,000 fewer jobs were created than first estimated – 133,000, not 162,000.

And July's jobs gains have been revised down by 31,000, from +21,000 to -10,000, meaning the US economy lost jobs in July.

French president Emmanuel Macron â will chair a video call with his â counterparts from â the ​G7 from 2.30pm local time (1.30pm BST) to discuss possible measures on the world markets â for crude and refined ​products, the ‌Elysee Palace ‌has said in a statement.

This follow US pressure on European nations to release additional diesel stockpiles in an ​attempt ​to reduce ​surging fuel prices.

UK mortgage rates have hit the highest levels in more than two years this morning, pushed up by the turmoil in the bond markets.

The average two-year fixed residential mortgage rate has now risen to 5.96%, up from 5.93% yesterday, Moneyfacts reports. That's the highest since 30 June 2024.

The average 5-year fixed residential mortgage rate has risen to 5.98%, up from 5.95% yesterday, and the highest since 29 September 2023.

This morning's jump in eurozone inflation hasn't prevented stock markets in the region recovering some of yesterday's losses.

Germany's DAX index has gained 1.1% so far today, while France's CAC is up 0.8%.

Traders will be reassured by the drop in the oil price today – Brent crude is still down around 2.4% at $99.87 a barrel.

High fuel prices are likely to push eurozone inflation to 4% by the end of the year, predict analysts Bill Diviney and Adrian Quinn at ABN Amro.

They told clients:

We expect inflation to continue to move higher over the coming months, although the biggest of the rises is probably behind us with today's release. Our base case assumes energy prices stay elevated well into 2027, and the broadening pass-through from energy to other categories is expected to push inflation to a peak of a little over 4% by the turn of the year.

The still-rising inflation trajectory alongside the continued diplomatic failure to fully resolve the energy supply crunch is likely to keep the ECB's Governing Council hiking rates over the coming months. We expect two additional rate hikes by the ECB, ultimately taking the deposit rate to 3%.