Weak US jobs data reshapes Fed rate expectations; CPI report and earnings in focus

US equities posted their best week in months after a surprise jobs report miss reduced the odds of a Federal Reserve rate hike, with attention now shifting to Wednesday's CPI report. The July non-farm payrolls report showed the US economy unexpectedly shed 23,000 jobs, well below the +80,000 consensus forecast, with prior months revised lower by a combined 103,000. The unemployment rate edged down to 4.1% from 4.2% as the participation rate fell to 61.4%, the lowest since early 2021. The rates market repriced the odds of a Fed hike in September down to 44% from 65% a week earlier. Consensus expects July headline inflation to fall to 3.4% year-on-year and core to edge lower to 2.5%, following June's cooler-than-expected report. An in-line outcome would strengthen the case for the Fed to keep rates on hold, while a hotter print could push rate-hike probabilities toward 60%.