Lower-than-expected private employment growth in August triggered positive reactions Thursday in interest rate-sensitive assets like gold and the Japanese yen, while pushing Treasury yields lower as traders bolster their bets on a 50-basis-point rate cut by the Federal Reserve this month.

U.S. private employers added 99,000 jobs in August, the lowest reading since January 2021 and down from a downwardly revised 111,000 in July, the ADP National Employment report revealed.

The outcome fell short of the predicted 140,000, highlighting a surprising cooling in labor market conditions last month.

While weekly jobless claims were in line with expectations and offered little new insight, signs of further weakness in the labor market surfaced in the Challenger Job Report, which recorded 75,891 job cuts in August — a sharp 193% increase from the 25,885 cuts in July.

A day earlier, official statistics revealed that job openings fell to 7.673 million in July, the lowest in over three years, with vacancies now almost closing the gap with the level of unemployment.

Following the slew of Thursday's labor market data, market-implied probabilities for a 50-basis-point cut surged to 45%, as per CME Group's FedWatch tool, ahead of the highly anticipated official jobs report on Friday.

Market Reactions

Treasury yields moved lower across the board, with the policy-sensitive two-year yield down by 3 basis points to 3.72%, hitting the lowest yield in a month.

The benchmark 10-year yield dropped to 3.73%, marking its lowest level in a month. It also officially surpassed the two-year yield for the first time since July 2022, marking the end of the U.S. yield curve inversion.

In premarket trading, the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) was 0.3% higher at 9:00 a.m. in New York, after closing 1.3% higher on Wednesday.

The Japanese yen rose against the dollar, amid narrowing yield differentials between the two regions. The Invesco CurrencyShares Japanese Yen Trust (NYSE:FXY) was 0.4% higher.

Gold prices rallied on the back of disappointing employment data, with the commodity surging to $2,515 per ounce. The SPDR Gold Trust ETF (NYSE:GLD) was up by 0.9%.

U.S. major indices are set to open slightly in the red, with S&P 500 futures down 0.1% and Nasdaq 100 futures slipping 0.3%.

Sector-wise, technology stocks, as tracked by the Technology Select Sector SPDR Fund (NYSE:XLK), lagged, down 0.6%. Utilities, as tracked by the Utilities Select Sector SPDR Fund (NYSE:XLU), strengthened the most, up 0.7%.

• Could August Jobs Numbers Keep Recession Fears At Bay? 'This Time Is Different,' Analyst Says

Illustration created using artificial intelligence via Midjourney.