Global stocks diverge as bonds stay under pressure despite soft US jobs data

In the week from September 28 to October 2, global markets sent a mixed signal, with equities and bonds moving in opposite directions. The S&P 500 slipped just 0.3% over the week, a fairly mild pullback, but the UK’s FTSE 100 dropped 2.2%, its worst weekly loss since April, as rate‑sensitive sectors such as banks and homebuilders came under heavy pressure. The common backdrop was another leg higher in government borrowing costs: 10‑year US Treasuries briefly touched 5.34% before ending the week near 5.28%, while the UK 10‑year gilt yield also finished above 5.3%. Those levels translate into more expensive funding for companies and higher mortgage rates, a clear headwind for risk assets.

Ironically, the catalyst was a weaker‑than‑expected US jobs report. Nonfarm payrolls rose by just 29,000 in September versus a consensus around 90,000, and the unemployment rate climbed to 4.2%. Normally that kind of data would spark a bond rally and push yields down on hopes that the Federal Reserve is done hiking. This time, however, the initial rally faded quickly as investors focused on the risk that inflation could remain sticky even as growth slows. The result is a market caught between “growth scare” and “higher for longer” narratives. Mega‑cap US growth stocks continue to hold up relatively well, but smaller companies and European equities are feeling the strain, underscoring that interest‑rate moves remain the dominant driver across global stock and credit markets for now.