This past week brought a lot of ups and downs for global markets. Investors juggled strong job data in the U.S., rising oil prices, and persistent inflation worries, making for a volatile few days. 

Here’s a look at what unfolded and why it matters.

U.S. Job Growth Surprises Everyone

The U.S. job market unexpectedly performed well in September, adding 254,000 jobs—way above the predicted 147,000. Most of the gains came from leisure, hospitality, and healthcare sectors. The unemployment rate also dipped slightly to 4.1%, continuing to show that the economy is holding up despite concerns about a slowdown.

But here’s where things get tricky: this strong jobs report puts the Federal Reserve in a bit of a bind. They had just paused rate hikes in September, hoping to take a breather and see how inflation was evolving. With the labor market showing so much strength, there’s concern that inflation might not be under control after all. Wages are rising, too, and higher wages often lead to more consumer spending, which can push prices up. Investors are now wondering if the Fed will have to return to raising rates sooner than expected to keep inflation in check.

Inflation: Still Hanging Around

Speaking of inflation, it hasn’t exactly disappeared. The September U.S. Consumer Price Index (CPI) showed a 2.4% rise compared to last year, a bit more than analysts expected. While this is way below the scary inflation numbers we saw in 2022, it’s clear that price pressures haven’t gone away completely.

Rising wages, like those mentioned in the jobs report, make it harder to bring inflation down to the Fed’s 2% target. Core inflation—excluding the more volatile food and energy categories—hasn’t eased as quickly as hoped, keeping policymakers and investors on edge.

Oil Prices Break $100, and Inflation Worries Grow

One of the biggest stories of the week was oil. Brent crude oil shot up past $100 per barrel, the highest it’s been since the end of last year. The reason? OPEC+ is sticking to its production cuts, and plenty of geopolitical tension in the Middle East is adding to the uncertainty.

This spike in oil prices couldn’t have come at a worse time, as inflation was already a concern. Higher oil prices mean higher costs for businesses, which can translate into more expensive consumer goods and services. Gas prices are creeping up, too, with natural gas jumping 4% this week. This creates added pressure for households and companies alike, especially as we head into the winter months when energy demand typically rises.

Europe’s Struggles: Inflation and Slow Growth

Europe is having its own set of problems. Germany, the largest economy in the Eurozone, is stuck with a shrinking manufacturing sector and sluggish growth. The European Central Bank (ECB) is in a tough spot: inflation is still above their target, and higher energy costs only worsen things. This makes it hard for the ECB to cut rates or introduce new measures to boost the economy without risking an inflation surge.

Businesses and consumers across Europe are feeling the squeeze, and if energy prices keep climbing, things could get even more challenging as winter approaches. The region's growth prospects could be better, and many wonder what steps the ECB will take to address these issues.

What's Next for the Markets?

As we continue through October, all eyes are on how inflation evolves and whether central banks like the Fed or ECB will adjust their strategies. Oil and natural gas prices will be key factors to watch. If energy costs keep rising, central banks may be forced to take more aggressive action to control inflation, even if it means slowing down the economy.

This week served as a reminder that while the economy shows signs of strength, uncertainties surrounding inflation, energy prices, and global growth continue to keep markets on edge.

For illustrative purposes only. Does not represent an investment recommendation. For more information, please see our Social Media Disclosure.