Just now, a sharp plunge! The Federal Reserve unexpectedly cuts interest rates!

【Introduction】Non-farm Payrolls Data Released, Market Volatility Intensifies, US Stocks Pre-market Continues to Plunge, Crude Oil Surges

Brothers and sisters, tonight the global markets are experiencing intense volatility. The Iran conflict has caused crude oil prices to surge continuously, and at this moment, the US has released non-farm payroll data showing an unexpected decline in employment and a slight increase in the unemployment rate, adding to the downward pressure!

On the evening of March 6, US stock futures plunged sharply before the market opened, with the declines continuing to widen.

According to the US Bureau of Labor Statistics, due to severe winter weather and a strike at a major healthcare provider, the US economy saw a decrease in jobs in February.

Non-farm payrolls in February decreased by 92,000. This figure not only fell short of the expected increase of 50,000 but also was below the revised January figure of 126,000 new jobs.

February marked the third month in the past five with job declines. Revised data previously released showed December 2022 saw a decrease of 17,000 jobs.

Meanwhile, the unemployment rate slightly rose to 4.4% due to job losses across several key industries.

Lindsay Rosner of Goldman Sachs Asset Management stated that signs of a weakening labor market serve as a reminder to the Federal Reserve that delaying rate cuts could come at a cost, even though short-term policy remains influenced by ongoing Middle East conflicts. The developments in Iran and their potential impact on inflation somewhat overshadow the US employment situation, making the path to policy normalization more uncertain. We expect the Fed to eventually complete the remaining two “normalization rate cuts,” bringing rates back to neutral, but the timing remains unclear amid current uncertainties.

Analysts commented, “This is a rather weak report, which indeed puts the Fed in a difficult position.”

Following the release of the non-farm payroll data, US stock index futures that had already declined further fell. The yield on the 10-year US Treasury briefly dropped, spot gold surged in the short term, and traders increased bets that the Fed will cut rates at least once by 2026.

Meanwhile, crude oil prices continued to soar, with Brent crude rising over 5% to $90 per barrel, and West Texas Intermediate (WTI) crude jumping over 8%.

Analysts noted that the employment report did not improve market sentiment. Subsequently, the Iran conflict caused oil futures prices to skyrocket, further impacting the markets. Combining this with the unexpectedly weak US employment data, markets are warning of a potential “stagflation.”

Ellen Zentner, Chief US Economist at Morgan Stanley Wealth Management, said, “Today’s data could put the Fed in a dilemma. If the labor market weakens significantly, it should support rate cuts. But if oil prices stay high for a prolonged period, it could reignite inflation, forcing the Fed to hold steady.”

Additionally, reports indicate that Kuwait has begun reducing oil production at some fields due to insufficient storage capacity, signaling a broader oil storage crisis that poses new risks to global markets. As an OPEC member, Kuwait is discussing further restrictions on its oil production and refining capacity to meet only domestic demand. They expect to make decisions on these broader production cuts within a few days. Data provider Kpler noted signs that Kuwait has already started reducing output and added that the country will need to cut further in the coming days or face storage filling up in about 12 days. Reopening oil wells after shutdowns is costly, often taking days or weeks, and is usually a last resort. UBS commodities strategist Giovanni Staunovo said, “Even if exports return to normal immediately, things will not fully return to pre-shutdown levels.”