For the first four days of the week, the bond market was under growing strain. On Thursday, the yield on the 10-year US Treasury, the rate at which Washington borrows for ten years, hit 5.34%, its highest level since 2002. Then on Friday came news that should have rattled investors: the US economy added just 29,000 jobs in September. Instead, markets welcomed it. What was bad news for workers and shareholders suddenly looked like good news for borrowers. That reversal is the story of the week.

Equities. The S&P 500 ended roughly flat, the Nasdaq Composite edged higher and the Dow slipped. Micron, a maker of memory chips for AI, reported quarterly revenue almost five times higher than a year earlier. Europe’s STOXX 600 hit a three-month low on Thursday and still lost ground over the week. Japan’s Nikkei 225 gained about 4%, carried by chipmakers; Hong Kong’s Hang Seng fell about 2%.

What it means. Two forces pulled against each other. Rising borrowing costs weighed on most shares, because they make loans more expensive and future profits worth less today. AI pulled the other way: Micron showed the spending boom is still turning into real revenue, so chip stocks climbed while other parts of the market stalled.

Rates and credit. Tensions peaked on Thursday, when the 30-year US Treasury yield reached 5.68%, as heavy government borrowing and the still-closed Strait of Hormuz kept inflation fears alive. In Europe, Germany’s 10-year Bund yield rose to 3.63%, and the gap between French and German borrowing costs passed 1.30 percentage points, its widest since 2012, as Paris unveiled a EUR 54 billion austerity budget. Relief came from two directions. On Wednesday, the Fed’s preferred measure of inflation, the personal consumption expenditures (PCE) price index, showed underlying prices rising 3.0% from a year earlier, below the 3.3% economists had expected, a sign that inflation is easing faster than anticipated. Then Friday’s jobs report cut the odds of another Fed rate hike in October from roughly two in three to less than one in four, pulling the 10-year Treasury yield back to around 5.28%.

What it means. Rising yields mean lenders want to be paid more, because they expect higher inflation, heavier government borrowing, or both. A weak jobs report helps because a cooling economy makes the Federal Reserve less likely to raise rates again.

Currencies. The dollar gained against most major currencies. The euro fell 1.05% to about USD 1.125, weighed down by the French budget worries. Meanwhile, the Swiss franc remained a refuge from the turmoil.

What it means. A currency is partly a vote of confidence in public finances. Doubts about France weigh on the euro as a whole, while Switzerland’s low debt and stable politics make the franc a natural shelter in times of turbulence.

Commodities. Brent crude slipped below USD 100 a barrel on Friday and US crude to about USD 89, although the Strait of Hormuz remains closed. Gold fell 3.4% over the week to around USD 4,140 an ounce, and copper dropped almost 3% on signs of weaker factory activity in China.

The week ahead. The minutes of the Fed’s September meeting will be published on Wednesday. At that meeting, the Fed raised rates for the first time in more than three years. The minutes should give a clearer sense of where rates are heading.

See you next Monday for the next chapter.