Why did U.S. non-farm payrolls exceed expectations, but equity assets rebound?

On the evening of April 3rd, the United States announced the March non-farm payroll data, which greatly exceeded market expectations. After the data was released, U.S. Treasury yields and the dollar rose, theoretically putting short-term pressure on technology growth assets, but the Nasdaq opened lower and then rose throughout the day, continuing the rebound on Monday; Japanese and Korean stock markets also rose in sync on Monday and Tuesday mornings. What underlying logic is behind this counterintuitive trend?

More worth noting is: since the pressure from rising U.S. Treasury yields and the dollar has been temporarily digested by the market, do the technology sectors in A-shares and Hong Kong stocks also have a chance for recovery?

1. What is non-farm payroll data? Why is it important?

Non-farm payroll (NFP) is a monthly employment report released by the U.S. Department of Labor, with the most important indicators being the number of new non-farm jobs added, the unemployment rate, and the average hourly earnings growth rate.

The importance of non-farm payroll data lies in its ability to influence the Federal Reserve’s monetary policy, thereby affecting global liquidity and asset prices.

Strong non-farm payroll data → vigorous consumption → rising inflation risk → increased rate hike expectations → dollar appreciation and higher U.S. Treasury yields → pressure on asset valuations; conversely, it can boost asset valuations.

In other words, people are not only concerned with the data itself but also whether it will cause the Fed to change its stance—such as raising or cutting interest rates.

2. Why did U.S. non-farm payrolls beat expectations but equity assets rebound?

On the evening of April 3rd, the U.S. announced the March non-farm payroll data, which at first glance appeared very strong:

1. The number of new non-farm jobs far exceeded expectations (190k vs. 65k expected); 2) The unemployment rate fell back to 4.3% (vs. 4.4% expected); 3) Average hourly earnings growth cooled somewhat.

After the data was released, U.S. Treasury yields and the dollar rose, and in the short term, technology growth assets might face some pressure.

But if we look beyond the surface, the March non-farm payroll data isn’t as strong as it seems:

1. Most of the new jobs in March came from the education and health sectors (+91k), mainly due to the end of strikes in the healthcare industry; information and financial sectors continued to decline, reflecting the negative impact of AI on employment substitution;

2. The decline in the unemployment rate was not due to improved employment but because of a decrease in labor force participation (currently 61.9% vs. 62.5% in November 2024), meaning many people have given up looking for work and are no longer counted as “unemployed”;

3. Compared to the fluctuations in non-farm employment numbers, wage levels, despite high inflation, still show a downward trend, indicating a cooling employment market.

Recently, non-farm payroll data has been highly volatile, reducing its reference value for individual months. However, over the past four months, considering the overall trend, the average monthly new jobs added is 47k (vs. 76k in September 2025 when the Fed restarted rate cuts), maintaining a weak state of “low employment + low layoffs,” which is conducive to rate cuts:

Data from the U.S. Bureau of Labor Statistics, as of April 2, 2026.

Looking at the longer-term trend, since 2023, the unemployment rate has been trending upward, new non-farm jobs have been decreasing, and the year-over-year growth rate of average hourly earnings has slowed, indicating a weakening employment situation.

Therefore, if non-farm payroll data continues to show a weak trend, the probability of the Fed cutting rates will marginally increase, and liquidity may continue to loosen, further supporting valuation recovery in Hong Kong and A-share technology sectors.

Chart: Trends in new non-farm jobs and unemployment rate

Data from Wind, as of April 6, 2026.

Chart: Trends in average hourly earnings in non-farm payrolls

Data from Wind, as of April 6, 2026.

4. Regarding rate cuts, there is a significant divergence between the market and the Fed—whose guidance should be trusted?

Recently, the interest rate futures market has been pushing back the timing of the next rate cut (as shown below, the probability of a cut in September 2027 just barely exceeds 50%), while the March FOMC dot plot indicates a rate cut in 2026 and 2027.

Chart: Rate futures pricing indicates the next cut after September 2027

Data from FedWatch, as of April 2, 2026.

Chart: March FOMC dot plot points to one rate cut in 2026 and 2027 each

Data from the Federal Reserve, as of April 2, 2026.

The main reason for this divergence is the sharp rise in international oil prices, which worries the market: high oil prices on one hand push up inflation, and on the other hand, suppress demand and drag down economic growth, thereby affecting monetary policy paths.

There is a clear “expectation gap” between the market and the Fed—whose guidance should be trusted?

In fact, when it comes to rate cuts, both the Fed and market expectations are important references. The ultimate determinant is the economic data itself. However, since the Fed’s FOMC dot plot is the most direct official policy roadmap, we can treat it as the baseline scenario for future monetary policy, continuously monitoring employment and inflation data to capture changes in the outlook.

Under this baseline, medium-term liquidity is expected to remain relatively loose: currently, the March FOMC dot plot indicates one rate cut in 2026, and most committee members see rate hikes as the non-baseline scenario. Additionally, on March 30, Fed Chair Powell publicly stated that “current long-term inflation expectations remain generally stable,” which somewhat alleviates market concerns about liquidity. Therefore, if inflation remains stable and non-farm payrolls continue to weaken moderately, rate cuts may still occur this year, releasing liquidity.

5. How does short-term liquidity tightening affect Hong Kong and A-share tech stocks since the beginning of the year?

Looking back, the Hang Seng Tech Index and the Sci-Tech Innovation Board 50 Index, representing Hong Kong and A-share tech sectors respectively, show a clear negative correlation with U.S. Treasury yields.

As offshore growth tech sectors, the Hang Seng Tech Index’s valuation is anchored to U.S. Treasury yields, and with a high proportion of foreign investors in its holdings, it is very sensitive to global liquidity.

As a representative of China’s independent and controllable industrial base, the Sci-Tech Innovation Board 50 reflects China’s self-reliant industry foundation. Its “high valuation, high growth” characteristics also make it susceptible to global liquidity fluctuations—though since its pricing is more anchored to domestic policies and industry trends, its impact is usually weaker than that on the Hang Seng Tech Index.

Since the beginning of the year, shocks such as “Fed Chair nomination Wosh” and “Middle East tensions” have occurred one after another. The probability of the Fed cutting rates in June 2026 dropped from over 80% at the start of the year to nearly 0%. Liquidity conditions can partly explain the recent relative weakness of the Hang Seng Tech and Sci-Tech Innovation Board 50 indices.

Chart: The probability of a June 2026 rate cut has been declining since the start of the year

Data from FedWatch, Wind, as of April 2, 2026.

But when the market is pessimistic, some panic, and others see opportunities.

Compared to other sectors, the current valuation expectations for Hang Seng Tech and Sci-Tech Innovation Board 50 are relatively well priced in terms of medium-term liquidity pessimism. CICC analysts believe, “The current futures market is very pessimistic about the situation. As long as the conflict doesn’t persist into the second half of the year and oil prices don’t stay above $100, the Fed can still cut rates.”

Note: The view is cited from CICC’s “Has the Market ‘Dipped Enough’?”

Thus, if the Fed cuts rates within the year, medium-term liquidity will improve, and Hang Seng Tech and Sci-Tech Innovation Board 50 are likely to be among the first sectors to see valuation recovery.

6. As high-volatility assets, choosing the right investment approach for Hang Seng Tech and Sci-Tech Innovation Board 50 is crucial

Honestly, investors holding Hang Seng Tech and Sci-Tech Innovation Board 50 have been going through a tough period recently. But it’s worth calmly reviewing whether similar situations have occurred in history and how better to respond.

Many investors are not lacking judgment: they recognize AI as a long-term trend, but in practice, it’s often difficult to precisely time the highs and lows. The problem usually lies in the participation method, because for high-volatility growth assets like Hang Seng Tech, single-shot timing is very challenging.

Therefore, it’s advisable to extend the horizon, adopt disciplined dollar-cost averaging, and diversify costs over time to smooth out volatility. When valuations are low but the trend is unclear, this approach can avoid “FOMO” anxiety and reduce the risk of chasing highs.

Looking back, using February 2022 as a sample, we simulated a dollar-cost averaging strategy, as the external environment then was quite similar—both were in a “geopolitical conflict + oil price surge” state, and the Hang Seng Tech and Sci-Tech Innovation Board 50 indices were under pressure. Let’s see what results a long-term holding approach could have achieved:

Starting to invest in Hang Seng Tech in February 2022: at a closing price of 5,069 points, the first positive return was on March 17, 2022, with the index about 10% below the initial level; when the index returned near the initial level on June 27, 2022, the cumulative profit from the strategy exceeded 15%.

Charts: Dollar-cost averaging in Hang Seng Tech since 2022

Charts: Dollar-cost averaging in Sci-Tech Innovation Board 50 since 2022

Data from Wind, simulation period from 2022/2/24 to 2026/4/2, with daily fixed investments, no consideration of subscription/redemption fees, and dividend reinvestment. Cumulative return = (final total market value – total invested principal) / total invested principal * 100%. Total invested principal = daily fixed amount × number of investment days; final market value = sum of daily invested shares (daily investment amount ÷ index point) × index at simulation end. The backtest is for illustration and simulation only, not as trading advice or guarantee of returns.

7. Summary

Overall, the medium-term weakening of non-farm payroll data supports expectations of Fed rate cuts. If inflation remains relatively stable, liquidity is likely to loosen marginally, and the valuation discount for Hong Kong and A-share tech sectors may be sufficiently priced in, with potential for valuation recovery. For long-term investors optimistic about Hong Kong and A-share tech prospects, dollar-cost averaging to diversify costs and smooth volatility is a noteworthy strategy.

The Hang Seng Tech ETF (E Fund, 513010, with A-shares 013308 and C-shares 013309) is a close-tracking index product with advantages in liquidity, fee structure, and transparency.

The Sci-Tech Innovation Board ETF (E Fund, 588080, with A-shares 011608 and C-shares 011609), closely tracking the SSE STAR Market 50 Index, gathers industry leaders in AI chips, semiconductor equipment, materials, and more—an excellent choice to seize structural opportunities within AI.