Muted Market Reaction After ADP; Risk Tone Steadies but Caution Persists – Action Forex

The latest ADP private employment report provided a modest dose of reassurance to the Fed, showing that U.S. job growth may be stabilizing after a period of softness. Following the data, Fed funds futures reflected roughly 70% chance of a December rate cut, up slightly from last week but still leaving room for doubt.

Markets appear cautiously optimistic that policy easing remains on track, but investors are waiting for confirmation from upcoming nonfarm payrolls and inflation releases. For now, the Fed’s “wait-and-see” message continues to anchor expectations.

Broader market reactions, however, were subdued. The mood in risk assets steadied after Tuesday’s sharp tech-led selloff, which erased earlier optimism around AI and growth stocks. U.S. equity futures traded flat, suggesting investors are reluctant to rebuild risk exposure too quickly. While the worst appears to have passed for now, renewed selling in technology shares could return later in the session if rebound attempts fail to gain traction.

In the currency markets, the weekly performance picture is little changed. Yen remains the strongest performer, supported by safe-haven demand, followed by Dollar and Euro. At the weaker end, Kiwi continues to lag, trailed by Aussie and Loonie, while Sterling and the Swiss Franc trade in mid-range.

In Europe, at the time of writing, FTSE is up 0.17%. DAX is down -0.34%. CAC is down -0.04%. UK 10-year yield is up 0.029 at 4.459. Germany 10-year yield is down -0.002 at 2.654. Earlier in Asia, Nikkei fell -2.50%. Hong Kong HSI fell -0.07%. China Shanghai SSE rose 0.23%. Singapore Strait Times fell -0.13%. Japan 10-year JGB yield fell -0.01 to 1.667.

US ADP jobs rise 42K in October, large firms lead modest rebound

U.S. private-sector employment rose modestly in October, with ADP reporting a gain of 42k jobs, slightly above expectations of 32k. It was the first increase since July, suggesting some stabilization in hiring after months of softness. However, the pace of job creation remains well below levels seen earlier in the year, pointing to a labor market that is cooling gradually rather than collapsing.

Sector data showed 33k new service jobs and 9k in goods production. Large firms (+73k) drove most of the gains. Small (-10k) and medium-sized (-21k) companies continued to shed workers. Wage growth remained steady, with job-stayers up 4.5% yoy and job-changers up 6.7% yoy, both unchanged from September.

Overall, the data suggest hiring is stabilizing at lower levels, aligning with the Fed’s goal of cooling the economy without triggering widespread job losses.

Eurozone PPI edges lower, energy costs weigh

Eurozone producer prices dipped slightly in September. PPI fell -0.1% mom and -0.2% yoy, matching market expectations.

The decline was led primarily by softer energy prices, which fell -0.2% on the month, while prices for intermediate and capital goods remained stable. Among consumer categories, durable goods rose 0.3% and non-durable goods edged up 0.1%.

Across the broader European Union, producer prices rose 0.1% mom and 0.1% yoy, suggesting only a mild uptick in cost pressures. The largest monthly declines were seen in Bulgaria and Finland (-0.7%), while Romania (+1.2%), Estonia (+0.7%), and Lithuania (+0.4%) posted the biggest increases.

Eurozone composite PMI hits 29-month high as Germany leads recovery

Eurozone business activity accelerated strongly in October, with HCOB Services PMI finalized at 53.0, the highest in 17 months, up from 51.3 in September. Composite PMI also climbed to 52.5, a 29-month high, signaling the region’s strongest pace of expansion since early 2023. The rebound was broad-based across major economies, though notable divergences remain, with Spain and Germany leading the upturn while France continues to lag.

Among individual countries, Spain topped the rankings with a Composite PMI of 56.0, marking a 10-month high. Germany’s index surged to 53.9, its best in 29 months, followed by Ireland (53.7) and Italy (53.1). In contrast, France slipped further into contraction at 47.7, an eight-month low.

According to Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, the services sector’s upswing was supported by the strongest growth in new business since May 2023. Rising orders encouraged firms to hire more staff, providing hope that the expansion could prove sustainable into year-end.

Cost inflation in services has eased slightly, though selling price inflation ticked up, suggesting companies are regaining some pricing power amid firmer demand. For the ECB, the PMI figures pose no immediate inflationary threat.

UK PMI composite finalized at 52.2, firmer growth, easing inflation pressures

The UK services sector showed encouraging signs of recovery in October, with PMI Services finalized at 52.3, up from September’s 50.8. Composite PMI also improved to 52.2 from 50.1.

According to Tim Moore, Economics Director at S&P Global Market Intelligence, the latest survey “offered some positive signals,” as both output and new business growth accelerated notably from September’s lows.

Service providers reported stronger client demand and a pickup in new orders, particularly in domestic markets. Many firms cited resilient consumer spending and a turnaround in new client wins as key drivers of October’s improvement. The data also pointed to labour market stabilization, with job cuts slowing sharply and business expectations rising to a 12-month high.

While higher wages were still pushing up costs, the overall pace of input inflation fell to its lowest level since November 2024. Selling prices increased at the slowest pace since June.

BoJ minutes: Hawks urge gradual tightening, others prefer to wait

Minutes from the BoJ’s September policy meeting revealed a deeply divided board, with members debating the pace and timing of future rate hikes. The nine-member board voted to keep the policy rate steady at 0.5%, rejecting calls by two hawkish members who wanted to raise borrowing costs to 0.75%. The discussion centered on balancing the downside risks to growth against persistent inflationary pressures, particularly from elevated food prices.

Some members argued for moving sooner rather than later. One hawkish participant called for raising rates at “somewhat regular intervals”, citing an improving flow of data, including corporate earnings and the Tankan business survey, as valuable indicators to guide normalization. Another member warned that the cost of waiting too long to tighten policy was “gradually increasing,” even if it would allow the BoJ to gain more clarity on the global outlook, especially from the U.S.

However, the majority on agreed it was better to wait for “a little more hard data” before considering another move. They noted that while conditions for tightening were gradually being met, acting now could “surprise the market” and risk destabilizing financial conditions. Some emphasized that as long as inflation expectations remain insufficiently anchored, maintaining accommodative conditions was appropriate to support Japan’s recovery.

Another member highlighted uncertainty surrounding the U.S. slowdown as a key reason to stay cautious, but conceded that, based purely on domestic fundamentals, Japan might soon meet the conditions for another hike.

New Zealand labor market stagnates, unemployment rate rises to 5.3%

New Zealand’s labor market showed further signs of softening in the Q3, with total employment flat at 0.0% qoq, missing expectations for a small 0.1% qoq rise. On an annual basis, employment fell -0.6% yoy.

Unemployment rate ticked up from 5.2% to 5.3%, in line with forecasts, extending a full year of readings above 5%. The last time joblessness reached this level was in late 2016. Labor-force participation rate slipped 0.2 ppt to 70.3%, suggesting some workers are leaving the active job market.

Wage growth also cooled, with all-sector earnings up 0.4% qoq and 2.1% yoy, indicating reduced pressure on labor costs.

China RatingDog PMI Services falls to 52.6, export orders contract

China’s service sector expansion eased slightly in October, with the RatingDog PMI Services slipping from 52.9 to 52.6, in line with expectations. Composite PMI also moderated to 51.8 from 52.5. While domestic demand improved, weakness in overseas orders capped momentum, reflecting the impact of renewed global trade instability on China’s external-facing industries.

RatingDog founder Yao Yu said new export business “fell noticeably into contractionary territory” amid “increased instability in the global trade environment”. However, total new orders still expanded as domestic demand strengthened. Business expectations remained high even though confidence edged slightly lower. Employment stayed in contraction, but the pace of job losses eased.

Price pressures were uneven. Input costs rose for an eighth consecutive month, reaching their highest level since October 2024. On the other hand, output prices slipped back into contraction, implying margin compression for service providers.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.8078; (P) 0.8094; (R1) 0.8120; More…

Intraday bias in USD/CHF remains on the upside for 100% projection of 0.7828 to 0.8075 from 0.7872 at 0.8119. Break there will extend the corrective rally from 0.7828 to 138.2% projections at 0.8213. On the downside, break of 0.8066 minor support will suggest that deeper pullback might be underway, and turn bias to the downside for 55 4H EMA (now at 0.8025).

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8332 support turned resistance holds (2023 low).