Oil prices surge higher - Brent crude approaches US$93 per barrel. US labour market weaker than expected. Risk sensitive assets under pressure. Whipsaw price action for US treasuries

US equities fell following a weaker‑than‑expected US labour market report, while ongoing Middle East tensions drove another leg higher in oil prices. Brent crude pushed above US$92 per barrel despite efforts from US policymakers to boost supply. The S&P 500 closed 1.3% lower, with similar declines across European equities. Treasury markets saw whipsaw price action, while an early lift in the US dollar index faded into the weekly close.

An dip in oil prices during Asian trading proved short‑lived. The move followed news that US Treasury Secretary Bessent had granted a 30‑day waiver allowing Indian refiners to purchase Russian crude, including cargoes currently stranded at sea. However, sentiment quickly reversed after US National Economic Council Director Hassett said there had been no discussions around releasing Strategic Petroleum Reserve stocks. Adding to the upside pressure, reports that Kuwait has begun cutting output at some fields due to storage constraints saw oil prices surge higher.

US Nonfarm payrolls fell 92k in March which was far weaker than consensus estimates and there was a sizable 69k downward revision to previous months. The drop was one of the largest since the pandemic, partly reflecting a decrease in health-care employment due to strike activity but otherwise was spread across many sectors. The unemployment rate rose to 4.4%. Average hourly earnings rose by 3.8% y/y, marginally higher than expected. Overall, the report challenged the notion that the labour market is stabilising.

For the Federal Reserve, the softening in the labour market makes for a complex macro environment, with policymakers already grappling with renewed upside risks to energy and commodity prices. Those pressures raise the risk of a fresh inflation impulse in an economy that has overshot the Fed’s 2% target for much of the past five years. Ahead of the payrolls report, markets had pared expectations for easing this year to around 34bp. The weaker than expected data saw pricing re‑extend, with cuts now back closer to 45bp.

Although net moves across the US treasury curve were modest, this masked large swings in a whipsaw session. Yields traded higher initially on the back of energy prices before dropping sharply following the labour market data. 10-year notes ended the session unchanged at 4.14% having traded an 8bp range. There was a notable divergence between real yields which declined while break even inflation continued to climb. Inflation implied from 5-year TIPs increased to 2.62%, the highest level since peak tariff concerns last April and 6bp higher on the day.

The US dollar gained initially which saw NZD/USD trade down towards 0.5860 amid the risk-off tone but this moved faded into the global close. The AUD and NZD ended the overnight session on Friday little changed against the US dollar. Oil sensitive currencies including the Canadian dollar and Norwegian krone outperformed within the G10 basket. The US dollar made broad based gains over the past week benefitting from fragile investor risk sentiment.

NZ swap rates continued to push higher in the local session on Friday reflecting moves in global markets. 2-year swaps closed at 3.08%, up 6bp and at the highest level since early February. Longer maturities outperformed with the 2y/10y swap curve flattening to 100bp. Government bonds largely matched the move in swaps. 10-year yields closed at 4.49%, 4bp higher on the day. Australian bond futures were little changed from the local close suggesting limited directional bias for NZ rates on the open.

There is no domestic economic data scheduled today. In Japan, wage data is expected to show robust gains carrying into 2026. China’s February inflation should firm, reflecting Lunar New Year demand and favourable base effects from the timing of the holiday. Producer prices are likely to have declined at a slower pace for a third consecutive month, supported by firmer commodity prices led by oil.

Stuart Ritson is a Markets Strategist at BNZ Markets.