Daily Briefing | 2026-09-05: Strong Employment, High Oil Prices Tighten Policy Space

Machine-translated with NiuTrans. Read the Chinese original.

Today's main theme

The common theme over the past 24 hours is that the global economy has not followed the simple path of "slowing growth - falling inflation - loose monetary policy". U.S. job growth in August was significantly stronger than expected, indicating that demand and the labor market remain resilient; Meanwhile, the US-Iran conflict continued to restrict shipping in the Strait of Hormuz, with Brent crude oil rising more than 7% this week, pushing energy costs back to the core of inflation. On the other hand, ByteDance received nearly $30 billion in unsecured loans, demonstrating that banks are still willing to provide huge amounts of capital for AI infrastructure; China, on the other hand, continues to prioritize the innovation and digitalization of SMEs in its policy support. Growth has not slowed down, but capital, energy, and security costs are rising, making interest rate paths, technology valuations, and risk asset pricing more sensitive.

Five key news items

1. The US added 162,000 jobs in August, raising the probability of a September interest rate hike again.

The U.S. labor market has rebounded significantly after months of cooling. The U.S. Bureau of Labor Statistics reported on September 4 that non-farm payrolls increased by 162,000 in August, while the unemployment rate remained at 4.1%. The labor force increased by 683,000 people in a single month, and the labor participation rate rose from 61.4% to 61.6%. New jobs mainly come from the catering industry and local government education, while the information industry continues to reduce jobs. The importance of this combination lies in the fact that it is not simply a low unemployment rate driven by labor exit, but rather a strong capacity to absorb employment while the labor supply expands. Wage growth remains relatively moderate year-on-year, meaning that wages themselves may not be the main source of inflation. However, against the backdrop of rising oil prices, employment resilience will weaken the Federal Reserve's case for a rapid shift to easing. Reuters reported that the market raised its bets on a September rate hike again after the data was released. The most crucial next step is the inflation data ahead of the interest rate meeting in mid-September: if energy prices continue to rise and core prices lack a significant cooling, the Federal Reserve will face a policy mix where growth is acceptable but inflation risks rise again.U.S. Bureau of Labor Statistics Reuters

2. Hormuz shipping remains sluggish; Brent crude oil prices rose 7.6% this week, while diesel prices hit a record high.

The energy market continues to be the largest external variable in global inflation. Reuters reported on September 4 that Brent crude oil closed at $92.68 a barrel, up 7.6% for the week. WTI closed at $91.48, up nearly 10% for the week. More notably, in the refined oil sector, the average retail price of diesel in the United States rose to a record high of $5.85 per gallon. Shipping data also showed that only four cargo ships passed through the Strait of Hormuz on Thursday, far below the average of about 15 ships over the past 10 days. Before the war, about 125 large commercial ships passed through this waterway every day, and it was responsible for about one-fifth of the world's crude oil and liquefied natural gas supplies. Even if actual crude oil flows have not been completely disrupted, insurance premiums, detour costs, inventory precautionary requirements, and risk premiums have all been refactored into the price. Diesel fuel has a wide impact on road transportation, agriculture, construction, and manufacturing, so its impact is more likely to spread to consumer prices than simply rising crude oil prices. The next points to watch are whether strait traffic can resume, whether high oil prices will further push up government bond yields, and the inflation expectations of global central banks.Reuters Reuters Shipping Data

3. ByteDance secures $29.6 billion in unsecured loans as AI competition continues to shift towards capital-intensive infrastructure.

The threshold for AI competition is being raised further from model capabilities to financing capabilities. According to Reuters, ByteDance has secured $29.6 billion in loans from nearly 30 banks, a significant increase from the initial plan of $20 billion. This is the second largest loan financing in Asia this year, second only to the $40 billion raised by SoftBank in March for AI investment. The loan has an initial term of three years, renewable for two years, and does not require any pledge of assets or shares; Chinese banking institutions accounted for over 60% of the subscriptions, with banks from the United States, Europe, and Singapore also participating. Although the company explained to lenders that the funds would be used for general corporate purposes, sources said most of them would support AI-related initiatives, including chip procurement and data center capacity in Southeast Asia. The large amount of unsecured financing indicates that banks consider ByteDance's cash flow and credit quality to be strong enough, and it also shows that AI capital expenditures are spreading from the technology companies' own funds to the global credit market. The potential impact is that demand for data centers, power, networks, and chips will continue to secure long-term orders, but at the same time, the AI boom will also increase corporate debt and capital cost sensitivity. The next step depends on the pace of actual capital expenditures and whether these investments can generate commercial returns commensurate with the scale of financing.Reuters

4. China strengthens support for SMEs at the APEC meeting, with policies continuing to focus on innovation and digitalization.

China's policy support for small and medium-sized enterprises continues to extend from "stabilizing employment" to technological innovation and industrial upgrading. On September 4, Vice Premier Zhang Guoqing stated at the opening ceremony of the 32nd APEC SME Ministers' Meeting in Guangzhou that China is strengthening policy support for SMEs and hopes to promote high-quality development through a fairer market environment, an inclusive service system, and closer APEC cooperation. He also attended the China International Small and Medium Enterprises Expo, encouraging enterprises to focus on their core businesses, develop key technological capabilities, build brands, and pursue specialized, refined, and innovative development paths. This aligns with China's recent policy direction of promoting "specialized, refined, and innovative" and "little giant" enterprises: after real estate and traditional investment weakened their driving force for growth, SMEs are expected to simultaneously undertake the functions of employment, innovation, and supply chain upgrading. For the market, this means that policy resources will continue to flow more to advanced manufacturing, digitalization, and technology companies, rather than simple aggregate stimulus. What remains to be seen is whether fiscal funds, bank credit, and capital market support can truly reduce the financing costs of SMEs, and whether innovative policies can translate into improved orders and profitability.Chinese government website

5. Russian drone strikes Ukrainian Security Service headquarters, escalating urban warfare and opening diplomatic windows.

The target level of the Russian-Ukrainian airstrikes has been further raised. On September 4, a Russian drone struck the headquarters of the State Security Service of Ukraine (SBU) in downtown Kyiv. Ukraine claimed that the drone was directly aimed at the office of the head of the SBU. The attack injured at least 12 people and affected the area near the Hagia Sophia, a UNESCO World Heritage Site. The SBU is not only responsible for domestic security, but also participates in Ukraine's intelligence and special operations against targets within Russia, so directly striking its headquarters has obvious political and military symbolic significance. The incident comes as U.S. envoys are preparing to visit Kyiv and Moscow separately, and Ukraine hopes to push for a pause in hostilities during the diplomatic visit, further dampening expectations of a short-term cooling. Zelenskyy has called for a “proportionate and concrete” response, noting that the war’s impact on urban economies, insurance, and infrastructure repair costs could continue to expand if both sides further concentrate drones and long-range strikes on government, logistics, and energy facilities. The most important variables going forward are the scale of Ukraine's retaliation and whether the upcoming diplomatic contacts can still create any temporary ceasefire window.Reuters

Market Correlation and Today's Observation

Today's asset pricing can be summarized as "growth resilience remains, but capital prices are not coming down." Strong U.S. employment data, which would have been a positive signal for corporate profits, has become more likely to be interpreted by the market as the Federal Reserve not rushing to ease the situation after it appeared at the same time as high oil prices. As a result, long-term government bond yields and the US dollar are likely to remain high, while the performance of risk-sensitive currencies such as the Australian dollar and the Chinese yuan will be simultaneously pulled by China's growth expectations, commodity prices, and global risk aversion. In the energy sector, rising oil and diesel prices will increase transportation and manufacturing costs. If passage through the Strait of Hormuz continues to be restricted, commodity inflation may once again become a constraint for central banks.

In the technology sector, another type of "financing by the strong at high interest rates" has emerged. ByteDance's ability to secure $29.6 billion in unsecured loans indicates that high-quality large tech companies still have ample credit available for AI capital expenditures, but this does not mean that the entire tech sector can ignore financing costs. The market will place greater emphasis on cash flow, computing power orders, and return on capital, rather than solely valuing long-term narratives. China's support for small and medium-sized enterprises and specialized, refined, and innovative sectors also echoes this: policies aim to invest limited funds in companies that can generate technological and productivity improvements. At the geopolitical level, Russia, Ukraine, and the Middle East simultaneously maintain high levels of risk, leading to a continuous increase in energy, military, and security-related capital expenditures. The next three variables to watch are US inflation data, actual ship traffic in Hormuz, and whether AI's massive capital expenditures can continue to receive the same low-cost financing support in a high-interest-rate environment.

Cover image:Gonzalo Facello / Unsplash