US September payroll growth slows to 29,000 as Fed rate hike odds drop

Labor market slowdown softens Federal Reserve rate expectations

The United States Department of Labor reported on Friday, 2 October 2026, that nonfarm payrolls increased by 29,000 in September, coming in well below market forecasts that ranged between 89,000 and 98,000. In addition to the headline deceleration, employment numbers from the prior two months were revised downward from earlier tallies, which included August's 162,000 gain. The national unemployment rate rose from 4.1% to 4.2%. These figures altered market expectations for Federal Reserve policy, lowering the priced probability of an interest rate increase at the late October meeting to between 24% and 28%, down from over 70% recorded one week earlier. Investors now assign higher odds to a potential adjustment at the December meeting.

Equities advance as yields and dollar weaken

The weakening jobs data prompted gains across international equity markets alongside a pullback in government bond yields. The US Dollar Index dropped 0.22% to 101.83 points, while the yield on 10-year US Treasury notes declined 11 basis points from Thursday peaks to 5.2350%. US equity futures registered advances, with Nasdaq Composite contracts gaining 1.15%, Dow Jones Industrial futures rising 0.92%, and S&P 500 futures adding 0.88%. The VIX volatility index declined to 15.55 points. In Europe, the benchmark Stoxx Europe 600 index rose 0.72%, the German DAX gained 1.11%, the French CAC 40 increased 0.61%, and the British FTSE 100 added 0.34%.

Technology shares lead European trading as commodities shift

Demand across European markets concentrated heavily in technology, where sector shares advanced 2.0%, followed by telecommunications at 1.5% and industrials at 1.4%. In individual corporate trading, Infineon Technologies and AT&S each gained 6.2%, while ASM International climbed 4.9%. A 3.0% decline in Brent crude oil prices provided momentum for transport companies, with Ryanair rising 2.6%, IAG gaining 1.4%, and Lufthansa adding 0.9%. Weaker crude accompanied reports of 10,000 additional US troops and an aircraft carrier deployed to the Middle East, while WTI crude traded near $92 per barrel. By contrast, European banking shares slipped 0.2%, leaving the financial sector on course for its weakest weekly return since April.

Warsaw exchange decouples under domestic banking and energy pressures

The Warsaw Stock Exchange diverged from broader European gains as the WIG20 index slipped below 4,100 points to test technical support near 4,050 points, on total market turnover of 2.44 billion PLN. Polish banking equities recorded renewed selling, pushing the WIG-banki index down 1.5% to levels last seen in mid-September. Polish fuel company Orlen fell more than 3% in early trade after the president signed legislation establishing a tax on excess profits of fuel corporations, though buyers later recovered part of the intraday drop.

Central bank commentary presented varying viewpoints on monetary policy. Federal Reserve officials Bowman and Jefferson favoured delaying further increases until December, whereas Neel Kashkari noted that the trajectory of borrowing costs remains open.

It is not yet known how high interest rates will have to rise to effectively cool inflation.

Kashkari stated that the central bank must maintain control over price pressures following several years of supply-side disruptions, as markets continue pricing in monetary policy paths through 2027.