The Bond Rout, the Jobs Miss, and a Hike That Didn’t Help the Aussie: What Moved Markets This Week | Week Ending 2 October 2026
US 10-year yields hit their highest since 2002, jobs badly missed, and the RBA hiked to a 15-year high — yet the AUD fell. Here’s what moved markets from New York to the ASX, and why FX mattered more than equities for unhedged Aussie investors.
The Week at a Glance
Wall Street spent the week arguing with the bond market, and the bond market mostly won — on yields, not on the index headline. The US 10-year Treasury yield rose past 5.2% on Monday, past 5.3% on Wednesday and touched 5.34% on Thursday, its highest since 2002, as a global selloff in government debt dragged France, the UK and Japan along with it. Equities held up better than that tape deserved. Friday’s September payrolls report then delivered a miss big enough to rally stocks, though not big enough to bring yields down in any lasting way.
The final scoreboard, Friday 25 September close to Friday 2 October close: the S&P 500 finished at 7,722.72, down 0.3%. The Dow closed at 51,176.96, down 1.3%. The Nasdaq Composite ended at 27,190.86, up 0.5%, after touching an intraday record on Friday. The index divergence was the story of the whole month. For September, the Dow fell 4.3%, the S&P 500 about half a per cent, and the Nasdaq rose 1.9%. Most S&P 500 constituents finished September in the red. Technology carried the index.
In Sydney, the ASX 200 closed at 8,682.1, up 0.2% — its first weekly gain in five weeks — but only after a 1.99% rout on Thursday, the steepest one-day fall since early March. On Tuesday the Reserve Bank lifted the cash rate to 4.60%, and the Australian dollar fell through US$0.70 anyway.
1. The Bond Market Took the Wheel
The week’s first shock was geopolitical. On Monday the US rejected Iran’s ceasefire conditions, which kept the Strait of Hormuz closed, and the 10-year yield jumped past 5.2%. The S&P 500 fell 0.8%, the Nasdaq 0.9% and the Dow lost more than 300 points. On Wednesday the August PCE inflation data came in softer than expected, which should have been the relief rally. Treasuries rallied briefly, then sold off to fresh lows; the 10-year crossed 5.3% and the S&P 500 closed down 0.3% at 7,651.54.
Thursday was the climax. The 10-year touched 5.34%, its highest since April 2002, and the 30-year also printed a 24-year high, near 5.7%, in a selloff that was no longer a US story. France’s 10-year yield traded close to 5% — its highest since 2002 — as Paris unveiled a 2027 budget needing €43 billion of savings, and UK 30-year yields pushed above 6%. The same fiscal stress then reversed the US move: money left European debt for Treasuries, and the 10-year closed near 5.24%. For the quarter just ended, the 10-year posted its biggest quarterly rise this century.
That matters because the Federal Reserve is not the main character here. The funds rate sits at 3.75%–4.00% after one hike. At Thursday’s peak the 10-year was roughly 135 basis points above the top of that range; even after the pullback it was still about 125 basis points above it. The market is not only pricing the Fed. It is pricing oil-driven inflation, a heavy supply of government debt, and the possibility that the neutral rate is simply higher than anyone assumed.
2. A Jobs Miss That Didn’t Rescue Bonds
September payrolls rose by 29,000 against a Reuters consensus of 90,000. Unemployment ticked up to 4.2% from 4.1%. August was revised down from 162,000 to 133,000 and July’s gain of 21,000 became a loss of 10,000. Average hourly earnings rose just 0.1% on the month against 0.3% expected. The one soft-pedal on the bad news was the household survey, which showed a gain of 406,000 jobs and a higher participation rate.
Markets treated it as a pass for the Fed. FedWatch odds of an October hike fell to roughly 22%. New York Fed President John Williams had already said earlier in the week there was no need for urgency, and most traders still see at least one more quarter-point hike by December. Stocks rallied: the Nasdaq rose 1.2% to 27,190.86, the S&P 500 0.7% to 7,722.72 and the Dow 0.5% to 51,176.96, with Nvidia touching an intraday record.
The detail worth noticing is what the bond market did next. Yields fell on the headline, then rebounded and hovered around 5.2%–5.3%. When a growth scare cannot pull yields down, the market is telling you the yield is not mainly about growth. It is about inflation and supply. That is one reading, not a law — but it is the reading Thursday’s French and UK moves support. A stronger-growth story for a higher neutral rate, the more optimistic gloss some strategists put on the selloff, is harder to argue after a print this weak.
3. Oil: Down on the Day, Not on the Risk
The Iran war is now in its eighth month, having begun in late February. Crude spiked midweek — Brent gained more than 6% across Wednesday and Thursday on reports the US was sending an additional aircraft carrier to the Gulf — then fell about 3% on Friday as European governments discussed releasing strategic reserves. Brent finished near US$100–102 depending on contract and timing; WTI traded around US$89–93, near a four-week low. President Trump has said he is considering resuming bombing after the 3 November midterms but also wants a resolution. That is a lot of optionality for a market that already assumes the Strait stays disrupted.
4. Down Under: The RBA Hikes, the Aussie Falls
The decision. On Tuesday the RBA board voted 9–0 to lift the cash rate 25 basis points to 4.60%, effective 30 September — the fourth hike of 2026, 100 basis points in total, and the highest cash rate since November 2011. The statement said some of the upside inflation risks flagged in August were now materialising: the conflict in the Middle East had broadened, energy prices were higher than assumed, and AI-related demand was driving rapid price increases for technology-related goods. The board said it would continue to do what it considers necessary, including raising rates further.
The tone. FX desks read Governor Bullock’s press conference as a notch less hawkish than the statement. Markets had priced a cash rate above 5% by May 2027, which was more than she was willing to signal. Wednesday’s monthly CPI then showed underlying inflation holding at 3.6% year-on-year for a third straight month — a marginal miss that cut market odds of a November hike to about 20% from 36%. The policy-sensitive three-year government bond yield finished near 4.92%, down about 13 basis points over four sessions.
The currency. AUD/USD was about 0.7019 going into the meeting and closed Friday at 0.6933 on the RBA’s 4pm rate, a nine-week low and roughly 3% below where it stood three weeks ago. The US dollar traded near 17-month highs on the Treasury selloff. The currency absorbed a rate hike and still fell, because the US yield path was being repriced faster than Australia’s.
The equity market. The ASX 200 rose as much as 1.6% through Wednesday, closing that session at 8,789.3, then dropped 1.99% on Thursday to 8,614.4, its lowest close since mid-June, with roughly A$50 billion in market value erased in a day. Friday’s 0.79% rebound took it to 8,682.1. The sector split was sharper than the headline: information technology rose 7.3% for the week, its best since August, led by Codan on a sharp rally after a profit upgrade, WiseTech and Xero. The Small Ordinaries fell 0.87% to 3,326.4 and high-beta resources, particularly lithium and uranium, lagged. The big four banks rose on Friday; BHP and Rio Tinto each added 1.2%.
Gold. Bullion traded near US$4,180–4,215, about 2% lower on the week and 6% lower across September as yields climbed. On the ASX, Gold Fields’ A$38.7 billion cash-and-scrip proposal for Northern Star was rejected by the Northern Star board as opportunistic; Gold Fields says it intends to press on, and Elliott, a shareholder, has been reported pressing the board to engage. Northern Star’s new chief executive starts on 5 October.
5. The AI Tape: Priced for Perfection, Again
The AI trade stayed the market’s centre of gravity, but the signals this week were mixed.
Micron reported fiscal fourth-quarter revenue of US$54.2 billion, a record and up 379% on the year-ago quarter, guided the current quarter to US$60–63 billion (a midpoint around US$61.5 billion, about 8% above expectations) and held non-GAAP gross margin at 87%. The stock barely moved. That is the tell: the numbers were extraordinary and the expectations were higher. A counterweight sits in the filing: inventory days rose, and management itself had flagged a meaningful moderation in the rate of price increases.
Nvidia touched an intraday record on Friday. The buyback headline was older than the tape: on Monday the board added US$150 billion to the repurchase authorisation, taking remaining capacity to US$235 billion, the largest increase of its kind. Microsoft shares closed their best quarter since 1998, up 37.5% and adding roughly US$1 trillion in market value. Meta had its best month since 2022 yet fell 6.6% in the week, a reminder that ‘best month’ and ‘this week’ can point in opposite directions. Software, the year’s laggard, bounced hard — the part of the AI complex that had been punished for not owning the chips.
The Aussie-relevant detail is in the RBA statement itself. A central bank now cites AI-related demand as a driver of technology-goods inflation. Memory prices sit upstream of that — the same supercycle behind Micron’s margins. AI capex is no longer only an equity story. It is in the inflation basket, and therefore in the rate path.
The Scorecard
| Metric | Level / Move |
|---|---|
| S&P 500 (Fri close) | 7,722.72 / week −0.3% |
| Dow Jones (Fri close) | 51,176.96 / week −1.3% |
| Nasdaq Composite (Fri close) | 27,190.86 / week +0.5% (intraday record Friday) |
| September (S&P / Dow / Nasdaq) | ≈ −0.5% / −4.3% / +1.9% |
| ASX 200 (Fri close) | 8,682.1 / week +0.2% (first weekly gain in five weeks) |
| ASX 200 Thursday | −1.99% to 8,614.4 (steepest fall since early March) |
| ASX Small Ordinaries | 3,326.4 / week −0.9% |
| ASX 200 Information Technology | ≈ +7.3% for the week |
| US 10-year Treasury yield | peak 5.34% Thursday (highest since 2002); ≈ 5.2–5.3% Friday |
| US 30-year Treasury yield | 24-year high Thursday, near 5.7% |
| September payrolls | +29,000 (Reuters consensus 90,000); unemployment 4.2% |
| Fed funds target | 3.75%–4.00%; October hike odds ≈ 22% |
| RBA cash rate | 4.60% (+25bp, 9–0; fourth hike of 2026) |
| Australian 3-year yield | ≈ 4.92% |
| AUD/USD | 0.6933 (RBA 4pm, Friday); ≈ 0.7019 pre-RBA |
| WTI crude | ≈ US$89–93 (contract and timing dependent) |
| Brent crude | ≈ US$100–102 |
| Gold | ≈ US$4,180–4,215 / week ≈ −2% / September ≈ −6% |
US weekly performance is Friday 25 September close to Friday 2 October close. ASX week is Monday 28 September to Friday 2 October, Sydney time. Oil and gold levels vary by contract and snapshot time; treat as approximate.
The Read
Two weeks ago the problem was oil and the Fed. This week the problem is the price of money itself. The Fed has hiked once and is hesitating; the RBA has hiked four times and is already being asked whether it is done; and the bond market is moving on its own logic anyway. When a central bank’s own forecasts are overtaken by the 10-year, the 10-year is the number to watch.
For an Australian holder of US shares, the more useful lens this week was the currency. Over the three weeks from 11 September to Friday 2 October, the S&P 500 rose about 0.9% in US dollars, from 7,656.98 to 7,722.72. The Australian dollar fell from about 0.717 to 0.6933. An unhedged holder’s AUD return was therefore roughly 4.3% (WSDU calculation, spot-to-spot, ignoring dividends and costs) while a hedged holder kept something close to the 0.9%. That is the currency buffer from last week’s Investing 202 piece working in a bond-led selloff, not an equity crash — and a reminder that it is a tendency, not a contract. It cost nothing to hold this time. In the 2001–07 stretch it did the opposite for years: the Aussie rose through most of that period while US shares rose, so the currency deducted from the unhedged return instead of adding to it.
The same arithmetic runs the other way. A hawkish RBA that cannot hold the Aussie is an RBA fighting a stronger US dollar, not a weaker Australian economy. The interest-rate gap between the cash rate (4.60%) and the top of the Fed’s range (4.00%) is 60 basis points; markets price the path, not the gap. That is the point of the Currency Watch framework from two weeks ago, and this week was a clean live example.
What this week did not tell us: whether the bond selloff is done, whether the weak payrolls print is the start of a trend or a revision-prone blip, or whether the AI earnings cycle can keep clearing a bar that rises every quarter. Watch the 10-year and the oil strip together. The index headline told you least.
Next Week
| When | What |
|---|---|
| Monday 5 October | Northern Star’s incoming CEO starts; Gold Fields engagement in focus |
| Around Wednesday 7 October | FOMC minutes from the 15–16 September meeting |
| Mid-October | US September CPI; US bank earnings open the Q3 reporting season |
| Late October | Australian quarterly CPI — the data the RBA’s November call depends on |
| 27–28 October | FOMC meeting |
| 3 November | RBA cash-rate decision; US midterm elections (two clocks, not one event) |
Data Sources:
- Associated Press, 2 October 2026 (Friday index closes and weekly moves); Morningstar / Dow Jones, 2 October 2026 (S&P weekly).
- US Bureau of Labor Statistics, Employment Situation — September 2026, released 2 October 2026; Reuters, 2 October 2026 (consensus, revisions).
- Reuters, 1 October 2026 (US 10-year at 5.34%, highest since 2002; France near 5%; UK 30-year above 6%; biggest quarterly yield rise this century).
- Reserve Bank of Australia, Monetary Policy Decision, 29 September 2026; RBA exchange rates, 4pm 2 October 2026; Reuters, 29 September 2026.
- smallcaps.com.au and TradingView session wraps, 2 October 2026 (ASX closes, Thursday fall, sector moves).
- Micron Technology fiscal Q4 2026 results, 30 September 2026.
- NVIDIA investor relations, 28 September 2026 (US$150 billion repurchase authorisation increase; remaining capacity US$235 billion).
- Bloomberg, reported 1 October 2026 (Microsoft shares, September quarter).
- Reuters, 28 September 2026, and subsequent reports (Gold Fields proposal; Elliott).
- Prior WSDU notes for the 11 September S&P 500 and AUD/USD reference levels.
Oil, gold and intraday yield peaks vary by contract and snapshot. Figures above follow the source closest to the official close.
Wall St. Down Under | Australia
Subscribe | wallstdownunder.com.au
Disclaimer: Wall St. Down Under is an independent financial newsletter for informational and educational purposes only. Nothing published here constitutes financial advice, a recommendation to buy or sell any security, or a solicitation of any investment decision. Always do your own research and consult a licensed financial adviser before making investment decisions. Australian investors should consider their own financial situation, objectives, and risk tolerance. Past performance is not indicative of future results.
