Global markets remained on edge Friday as robust US employment data reinforced expectations of another Federal Reserve rate hike, sending the dollar higher and pressuring gold prices. Meanwhile, Anthropic's blockbuster IPO encountered growing skepticism, and oil headed for its steepest weekly decline since the pandemic.
US Payrolls Surge, Unemployment Falls
The US labor market showed remarkable resilience in October, with nonfarm payrolls increasing by 165,000, far exceeding the 59,000 economists had forecast. The unemployment rate ticked down to 4.1%, and upward revisions to August and September figures indicated stronger hiring than previously reported.
Average hourly earnings rose 0.4% month-over-month and 3.1% year-over-year, both above expectations. This wage growth could add to inflation concerns, potentially complicating the Fed's balancing act between controlling price pressures and supporting employment.
Traders responded by raising the probability of a December rate increase to 81%, up from 72.8% before the data release. The stronger dollar, which climbed to its highest level since October 29, and rising Treasury yields weighed on bullion.
Gold Slips Despite Weekly Gain
Spot gold fell 0.65% to $4,060.73 an ounce after touching a session low of $4,033.29. US gold futures for December delivery settled 0.96% lower at $4,073.90. Despite Friday's decline, spot gold was up 5.2% for the week, marking its strongest weekly performance since August.
Higher interest rates increase the opportunity cost of holding non-yielding assets like gold, making the metal less attractive when yields rise.
Oil Posts Steepest Weekly Drop Since Pandemic
Oil prices were on track for their largest weekly percentage decline since the onset of Covid-19, as expectations of de-escalation in the US-Iran conflict reduced the geopolitical risk premium. Brent crude futures for January delivery edged up 0.20% to $98.51 a barrel, while US West Texas Intermediate gained 0.54% to $91.04.
Brent was set to lose approximately 16% for the week, and WTI about 12%. The Democratic gains in the US midterm elections raised hopes of a potential easing of tensions with Iran, which could increase crude exports from the region. However, attacks on vessels in the Gulf and the Strait of Hormuz continued to support prices, with a Greek ship manager reporting a seafarer killed in an explosion aboard an oil products tanker on November 5.
Signs of an emerging supply surplus also weighed on the market, as demand destruction and changing supply patterns added to concerns about oversupply.
Anthropic IPO Faces Valuation Reset
Anthropic's proposed initial public offering is encountering growing investor resistance, as the recent technology stock selloff raises doubts about its expected $1.5 trillion valuation. According to The Wall Street Journal, at least three major investors believe the AI company may have to lower its valuation, with one suggesting it could be closer to $1 trillion. The company could also reduce its fundraising target from approximately $100 billion to $80 billion.
The concerns follow a sharp selloff in AI-related stocks, with the Nasdaq Composite falling as much as 5% on Thursday. Investors are also assessing Anthropic's financial performance and infrastructure commitments. Its revenue run rate exceeded $80 billion at the end of October, while its amended IPO filing showed third-quarter revenue of $17 billion. The company has approximately $895.4 billion in commitments for computing capacity, chips, and other infrastructure.
The IPO roadshow was initially expected to begin during the week of November 9, with pricing anticipated the following week. However, deteriorating market conditions could force the company to reconsider its timetable.
This article is for informational purposes only and does not constitute financial advice.
