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CNBC Daily Open: There's good news for investors beneath September's jobs number

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This report is from today's CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Israel declares war on Hamas
Gunmen from Palestinian militant group Hamas attacked Israel on Saturday. Israel formally declared war against Hamas on Sunday. "This is no less than Israel's 9/11," said Ian Bremmer, president of Eurasia Group, while China called for a "two-state solution" to "end the hostilities." Oil prices spiked 4% on the news of the invasion.

Blazing hot jobs report
U.S. nonfarm payrolls soared by 336,000 in September. That's almost two times the Dow Jones consensus estimate of 170,000 and over 100,000 more than the previous month — which was upwardly revised by 40,000. But the unemployment rate held steady at 3.8% against the forecast of 3.7%, while wages grew 0.2% for the month, less than the 0.3% expected.

Markets staged a stunning rebound
Major U.S. indexes had a winning session Friday, sharply reversing midday losses. Treasury yields rose, but likewise pared earlier gains. Asia-Pacific markets were tentative Monday. Japan and South Korea's markets were closed, while Hong Kong's morning session was canceled because of a typhoon warning. Mainland China's Shanghai Composite dipped 0.67% after reopening from the Golden Week holiday.

Golden Week, golden demand
China's domestic tourism during the "Golden Week" period, an eight-day holiday that ended Friday, rebounded to pre-pandemic levels, according to official figures. There were 826 million trips taken, during which 743.43 billion yuan ($103.24 billion) was spent. That's a 4.1% and 1.5% increase from 2019, respectively. However, both figures were still lower than the government's expectations.

[PRO] After jobs, inflation numbers
After last week's blockbuster jobs report, investors will be scrutinizing price readings this week for signs that inflation is abating despite a tight labor market. September's producer price index comes out Wednesday while the consumer price index is released Thursday. If price increases cool for the month — as economists expect — investors are hoping falling bond prices no longer drag down stocks.

The bottom line

The number of jobs the U.S. economy added in September was so unexpectedly high that markets fell right on cue. But what happened after was a lesson in looking beyond the headline number.

Economists were expecting job creation to slow from 227,000 in August to 170,000 in September. Instead, the shocker of a jobs report said nonfarm payrolls increased by 336,000 last month, the most since January. Markets slumped on the news.

Yet at the end of the day major indexes returned to the green in a stunning turnaround. The S&P rebounded to add 1.18%, the Nasdaq rallied 1.6% and the Dow Jones Industrial Average gained 0.87%. Treasury yields dipped slightly from session highs.

What prompted the rapid change in sentiment?

After reeling from the shocking headline number, investors took time to digest details in the report. Wage growth was softer than expected and unemployment held steady. Both statistics, in combination with the massive jobs creation, suggest U.S. consumers remain strong without adding more pressure to inflation. In other words, there's more evidence the Fed's successfully steering the economy to a soft landing.   

Despite the turbulence last week, the S&P managed to notch a 0.48% gain, breaking a four-week losing streak. The Nasdaq also managed to climb 1.6% for the week. However, the Dow was down 0.3%.

But any optimism October will prove a better month was diminished with Hamas' attack on Israel.

Oil prices spiked 4% on the news, adding to market jitters. But the surge in oil's likely a "knee-jerk surge," according to Vandana Hari, CEO of Vanda Insights. Neither side is a major oil supplier, so "the impact on the oil price will be limited" — unless the war expands into a regional affair with U.S. and Iran engaging in a proxy war, said Iman Nasseri, Middle East managing director of energy consultancy Facts Global Energy.

Still, it's a new headache markets have to deal with, throwing more volatility into an already turbulent trading season.

— CNBC's Lee Ying Shan contributed to this report

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