U.S. futures stabilized as interest rates returned to the top of investors’ agenda after the strong August jobs report, which reshaped expectations for tighter monetary policy at the Federal Reserve’s upcoming meeting. Dow Jones futures fell 0.5% to $53,196, while S&P 500 futures slipped 0.1% to $7,718. Nasdaq 100 futures rose 0.3% to $29,640, reflecting continued resilience in technology and semiconductor stocks despite pressure from interest rate expectations.
These moves followed a weak session on Wall Street on Friday, after U.S. Labor Department data showed the economy added 162,000 jobs in August, compared with expectations of only 56,000. The unemployment rate held steady at 4.1%, while the labor force participation rate rose to 61.6%. June and July payrolls were also revised higher by a combined 55,000 jobs, giving the report additional strength and prompting investors to scale back easing bets that had supported equities in recent weeks.
The probability of a 25 basis point rate hike at the September 15 and 16 meeting rose to about 60%, compared with nearly 49% before the jobs data, according to CME FedWatch. With this shift in market pricing, major U.S. indexes declined on Friday, as the Dow Jones lost 0.5%, the S&P 500 fell 0.4%, and the Nasdaq Composite dropped 0.3%. Technology and chip stocks appeared better able to absorb the pressure compared with consumer discretionary shares.
Markets are now turning their attention to inflation data due this week, led by the Consumer Price Index and the Producer Price Index, as the most important signals before the September rate decision. With U.S. markets closed on Monday for the Labor Day holiday and regular trading resuming on Tuesday, liquidity may be weaker than usual, leaving markets more sensitive to moves in Treasury yields, oil prices, and any change in Fed policy expectations.
In the European natural gas market, Citi believes current prices may be carrying a larger risk premium than necessary, as uncertainty continues over the timing of normal transit through the Strait of Hormuz and as winter approaches with European storage levels low. The bank estimates the probability weighted winter price at around €61 per megawatt hour, compared with the October 2026 TTF contract at €72.90 and the November to March strip at €70.90, a clear gap suggesting that the market is already pricing in a significant share of risks.
This setup leaves the market exposed to sharp reversals if supply fears begin to ease. Citi referred to the aggressive move in oil prices in late 2018 as a reminder that energy markets can quickly unwind risk premiums when sentiment changes. As a result, Citi revised its gas price forecasts to €60 per megawatt hour for the third quarter of 2026, €56 for the fourth quarter, and €41 for 2027, while acknowledging that adverse scenarios could still push prices higher.
At the portfolio level, UBS is encouraging investors to look at commodities as a key diversification tool rather than relying only on gold as a hedge. Gold’s roughly 10% rise in August may give investors an opportunity to lock in part of their gains and reallocate exposure across other commodity sectors, especially energy and industrial metals, amid renewed inflation risks, geopolitical tensions, and structural demand for raw materials.
UBS believes energy and industrial metals could benefit from several drivers in the coming period. Renewed attacks in the Middle East increase the sensitivity of energy markets to any supply disruption, while stronger than expected oil demand could support crude positions over the longer term. At the same time, industrial metals are benefiting from electrification, rising power demand, and increased spending on artificial intelligence infrastructure, while supply is struggling to keep pace with demand across several markets.
Commodities are also becoming an important risk management tool within portfolios, after UBS analysis showed that the correlation between developed market equities and commodities has declined over the past three and six month periods. This means commodities are moving more independently from equities and may tend to rise during periods of stock market weakness, giving portfolios a better chance to absorb shocks when both equities and bonds come under pressure at the same time.
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