Breakfast Bites - It's Jobs Friday!

Rise and shine everyone.

It’s Jobs Friday. Last week was NFP survey week and the claims data was revised upward. This could put some downward pressure on payrolls. Prior to that last month, we saw the jobs data come in much stronger than expected. With the Fed leaving the door open for one more hike, this is data that will continue to be watched.

Hourly Earnings is expected to come in higher at 0.30% vs. 0.20% last month and Nonfarm Payrolls are expected to come in at 180k vs. 336k last month. The unemployment rate is expected to remain stable at 3.8%.

US Equity Markets are trading marginally lower this morning as Apple’s cautious guidance and slowdown earnings growth is pulling down the largest weighting in the indices. The US Dollar Index has pulled back below 106, Gold and Oil marginally higher. Bitcoin is slightly lower possibly on the news of Sam Bankman-Fried getting convicted on 7 counts of fraud for FTX, a crypto exchange.

Bond Yields have taken a pause from their decline in pre-market trading this morning. The Yield Curve is at -0.33%, inverting further since yesterday.

Much of the rally in bonds has been driven by the strength in the US economy and inflation expectations. So now, we’re at a critical juncture where the weakening of the economy and a decline in inflation could actually be contrary to financial conditions tightening creating an odd situation where rates decline due to lower inflation and weaker growth.

Asia and Australia

• Asian equities higher across the region Friday. Australia closed higher for the fourth day in a row. Hang Seng leading the region with gains in REITs and healthcare, mainland bourses also higher. Strong gains for South Korea and Taiwan, Singapore REIT stocks also very strong, rest of Southeast Asia higher. India higher in early trades. Japan closed for a holiday.

• Caixin services PMI was 50.4 in October, versus consensus 51 and 50.2 in prior month. Data in expansion for tenth straight month, but only a marginal improvement of September's YTD low and was much slower than average in H1. New order growth was weakest YTD despite faster improvement in new export business, partly thanks to easing of travel restrictions.

• China Evergrande proposes offshore creditors get 30% equity stake in each of its two HK-listed subsidiaries

• Taiwan central bank minutes show concern about higher inflation ahead

Europe, Middle East, Africa

• European equity markets higher, yet off the best levels. European equity markets on track for positive close after three consecutive weeks of weaker levels.

• The Euro Area seasonally-adjusted unemployment rate increased to 6.5% in September 2023 from 6.4% in August, compared with market expectations of 6.4%.

• Exports from Germany fell by -2.4% MoM vs. the consensus of -1.1%. Last month exports actually rose marginally by 0.1%.

• Danish Shipping Giant Maersk to Lay Off 10,000 Workers Amid Lower Freight Rates. A seemingly tiny bit of news is actually quite telling. Maersk has 110,000 employees so it’s not a large proportion of the workforce but, it also means that the freight recession will gradually seep through the rest of the world. This isn’t a sign of lower cost pressure but rather a global slowdown.

The Americas

• Apple fiscal Q4 revenues largely in line, while EPS beat by ~5% as gross margin hit a record high 45.2% with help from lower commodity costs, favorable mix and services reacceleration. Of note was Apple's China revenue falling 2.5% y/y, worse than analyst estimates and company-wide sales decline. Company guided Dec Q revenue similar to year-earlier period, leaving it nearly 5% below the Street. More cautious takeaways noted China concerns not going away, highlighted potential for another year of no growth and mentioned worries about weakness across iPads, Macs and Wearables as leading indicator of further softening elsewhere.

• BoFA Weekly Flows: $64.2bn to cash, $4.5bn to bonds, $81mn from gold, $3.4bn from stocks

Chart of the Day

A very un-pretty picture of US banks compared to the S&P 500. BoFA shows that relative prices have hit an 80-year low! I read somewhere that Bill Gross is eyeing regional banks but, he’s still waiting to make a move.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Benzinga Pro, Trading Economics)