Global equity markets stayed volatile last week. The three major US indices closed roughly flat, though Nvidia's acquisition of Hugging Face lifted the Philadelphia Semiconductor Index 2.32%. Bank of Japan rate-hike expectations pushed the yen toward 155, but Friday's much stronger-than-expected payrolls limited dollar weakness. The 10-year Treasury yield briefly spiked to 4.8% and WTI reclaimed $90.
This week’s WEFC covers three themes: a payrolls rebound, rising bond yields, and AI’s shift from hype to cash flow as bottlenecks move downstream to packaging, memory, and power.
This Week's WEFC Preview
Weekly Market Roundup: Volatility Amid Geopolitics, Policy Shifts & Strong US Data
- The three major US indices closed roughly flat while semis outperformed. Nvidia's acquisition of the open-source platform Hugging Face lifted the Philadelphia Semiconductor Index by 2.32%. European and Asian markets showed no clear directional trend, mostly consolidating around unchanged levels.
- Heightened Bank of Japan rate-hike expectations pushed the yen toward 155. That weighed on the US dollar index, though Friday's much stronger-than-expected non-farm payrolls limited further dollar weakness. The 10-year Treasury yield briefly spiked to 4.8%.
- WTI crude moved back above $90 a barrel on Middle East uncertainty. Gold fluctuated with shifting Fed rate-hike expectations, rebounding after Waller's dovish remarks on Thursday before giving back gains on Friday.
- Energy and the yen led cross-asset performance. WTI (+7.38%) and Brent (+6.93%) topped commodities while wheat fell 5.35%; the yen gained 2.26% against a 0.27% decline in the dollar index. Utilities (+1.94%) led S&P sectors and consumer discretionary (-1.41%) lagged. Performance covers Monday, August 31 to Sunday, September 6.
▌Related Charts:Forex market · Commodity market · Bond market
Payrolls' Roll: August Rebound Puts the September Decision on Core CPI
- August nonfarm payrolls rose 162K, more than double the revised 21K prior print. That was well above the 56K consensus estimate, lifting the three-month average to 70K.
- Last month's largest drags reversed. Government employment returned to growth at 35K, while World Cup-distorted leisure/hospitality (62K) and retail (1K) also normalized back into positive territory.
- Unemployment held at 4.1% as participation rose to 61.6% from 61.4%. The labor force grew 683K and household employment rose 569K, matching consensus on the headline rate.
- Average hourly earnings growth slowed to 3.1% year-over-year from 3.2%, the softest reading of the current cycle.
- Core CPI is now the decisive input for September. Fed Governor Waller stated on September 3 that an in-line print would support holding rates steady, while an upside surprise could justify a hike. The Cleveland Fed's nowcast points to core CPI holding at 0.2% month-over-month, bringing the year-over-year rate down to 2.4% from 2.5% and supporting a high probability of a hold.
▌Related Charts: US - Nonfarm Payrolls (Monthly Change, Cumulative Revisions of Past 2 Months)· US - Nonfarm Payrolls by Sector (Monthly Change) · US - Labor Supply & Demand vs. Unemployment Rate · US - Hourly Wage Growth (YoY)
Deeper Debts: No Credible Consolidation Path, So Growth Has to Do the Work
- The FY2025 deficit fell to $1.78tn from $1.83tn on record tariff revenue. Tariff receipts reached $195bn versus $118bn prior, a gain of over 50%, as the effective tariff rate rose from roughly 2.4% in early 2025 to about 11%, pulling the deficit to 5.9% of GDP from 6.3%.
- The decline stops short of a trend reversal. FY2026's cumulative deficit through July already exceeds $1.8tn, surpassing the same period last year. CBO, OMB and primary dealer median forecasts point to deficits above $2tn within three years, and IMF projections hold the US near 7% of GDP through 2030.
- Issuance is shifting to the front end. The 3-month bill yield sits at 3.9% with money market fund assets approaching $8tn, and bills now make up 22% of outstanding Treasury debt versus roughly 15% pre-pandemic. Treasury's August refunding language shifted from assessing "increases" to "changes" in coupon auction sizes.
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About Weekly Economic and Financial Commentary (WEFC)
The MacroMicro WEFC is published weekly, delivering rigorous analysis and in-depth insights on the most critical market-moving events. Coverage spans equities, foreign exchange, bonds, commodities, global central banks, geopolitics, and the international political economy.
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