Stocks across the Atlantic surprised in the wake of the 6 October US jobs report as they registered their largest daily gains since late August, snapping a four-week losing streak.

Bond yields, which had surged earlier in the day to their highest since 2007, backed off giving some respite to risk assets.

Puzzlingly, the gains came after September’s jobs report revealed the economy added 336,000 jobs last month compared with 170,000 expected and the highest print in nine months – with an earlier reading also revised higher.

While it is tempting to see the headline data as providing ammunition for the Federal Reserve to keep interest rates higher for longer, investors took solace from nuances within the data.

Average hourly wage inflation cooled to 4.2% on an annual basis from 4.3% while job gains were concentrated across hospitality, health, and education, sectors which had lagged coming out of the pandemic, suggesting a catch-up rather than something more structural.

The stock market advance was stopped in its tracks after Middle East tensions erupted thanks to the devastating attacks on Israel.

Oil prices surged with Brent crude gaining 3% to $86.70 per barrel on 9 October while gold prices gained 1% to $1,846 per ounce. Previously gold had dropped 7% since the beginning of September reflecting a sharp increase in bond yields.

Gold is perceived as a haven asset during periods of global uncertainty. The price peaked at just over $2,000 per ounce in May 2023.

The dominance of oil companies within the FTSE 100 provided some ballast for the blue-chip index after the share prices of oil giants BP (BP) and Shell (SHEL) made progress off the back of the commodity price surge.

Bucking the trend in the sector though was oil and gas developer Energean (ENOG) whose shares sank 20% due to the proximity of its operations offshore Israel to the conflict zone.

Meanwhile, the airline sector was under pressure after several international carriers suspended flights to Tel Aviv and investors priced in the impact of higher fuel costs.

Liberum’s oil and gas analyst David Hewitt believes the effect to crude and product balances should remain ‘extremely minimal’ if the conflict remains within the Israel-Palestine locality.

The risk is the conflict escalates and draws in other political players such as the US, Iran, and Russia. Under this scenario the availability of the Straits of Hormuz becomes questionable argues Hewitt. ‘At that point you can make up any number you want for crude pricing,’ says Hewitt.

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