Market Observations - Sep 5
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The Scores so far:?crypto 38.9%, stocks 15.5%, gold 7.0%, H.Y. bonds 6.7%, I.G. bonds 3.5%, cash 3.1%, commodities 2.3%, oil 1.7%, U.S. dollar -0.4%, gov’t bonds -0.9%, YTD.
The 10-year Treasury is on course for 3rd consecutive loss (-0.3% in ’23, -17.0% in ’22, -3.9% in’ 21)…has never occurred in the 250-year history of the U.S. Republic.
Net 44% of Americans now support labor unions, the highest since ’72 (Chart 7); policies of fiscal excess, redistribution, and protectionism aiding recovery in the labor share of GDP from a secular low in the 2010s (and A.I. = UBI if robots replace humans on mass).
Econ Brief:??Could the labor market be stabilizing at levels that seemed familiar in 2019? Job growth is cooling from the rapid pace of 2021 and 2022 when businesses raced to rebuild their workforces and adjust to post-pandemic shifts in demand. Nonfarm payrolls rose by 187k in August, and gains have averaged 150k over the past three months. By comparison, the average for all of 2019 was 164k. The unemployment rate last month climbed to 3.8%, the highest since February 2022 and very close to the 2019 average of 3.7%. Wage growth remained elevated but is easing. For non-managers, average hourly earnings rose 4.5% from a year earlier in August, the slowest pace since June 2021. The corresponding figure averaged 3.6% in 2019. Monthly data tend to be noisy, but the latest Labor Department report suggests the jobs market is easing back toward pre-pandemic norms, when the labor market was strong but not overheated.
US Friday Market Wrap:?There’s nothing like a fresh slate of jobs data to start off the Labor Day weekend!?
Friday’s report from the BLS showed modest growth in jobs and a slight uptick in the unemployment rate. Alongside Thursday’s Commerce Department report showing that the Fed’s favored gauge of inflation continued moderating in July, Friday’s jobs report adds to the evidence that the Fed will be able to cool the economy without plunging it into recession.
The markets mostly took that as good news, with the S&P gaining 0.2% and the Dow adding 0.3%, or 116 points, respectively. Both of those indices were up over last week. The Nasdaq remained flat and was down on the week. Six of eleven S&P sectors closed green. Energy +2.01% led, and communication services -0.94% lagged.
Hyundai and L.G. will invest $2 billion more in the Georgia battery plant.?The two companies will boost their joint investment in the Georgia battery manufacturing plant by $2 billion and add an additional 400 jobs. They’ve now invested $4.3 billion and will be able to produce 300,000 electric vehicle batteries annually when the plant begins operating in January 2025. It comes as the federal government and states compete to bring manufacturing back to the U.S. with record incentives.
Disappointing data in Asia and Europe has sent the dollar broadly higher. The strong gains posted before the weekend were mostly consolidated yesterday when the U.S. and Canadian markets were on holiday. The rally resumed today. The Antipodeans and Scandis have been hit the hardest (-0.7% to -1.25%), but all the G10 currencies are down.
Most of the large Asia Pacific bourses were under pressure, though Japan, Taiwan, and India posted small gains. The Hang Seng and mainland stocks that trade there suffered the most, with more than a 2% drop. MSCI’s Asia Pacific Index snapped a 6-day advance.
Europe’s SXXP is off by about 0.25% in late-morning activity. It has fallen for the past 4-sessions.
U.S. index futures are trading heavier, with the S&P futures off about 0.2% and the NASDAQ futures down by around 0.35%.
Bonds are also selling off. European benchmark 10-year yields are 2-3 bps higher and near 4.22%. The 10-year U.S. Treasury yield is up about 4bps.
Higher yields and a stronger dollar are pushing gold lower. After testing $1950 at the end of last week, it approached $1930 today.
October WTI is steadying after pushing to $86 in early turnover. It is now near $85.50.?
With a steady stream of new measures to support the economy, Chinese officials rendered today’s Caixin PMI less relevant. In any event, the services PMI softened to 51.8 from 54.1 in July. Recall that the Caixin manufacturing PMI had unexpectedly risen to 51.0 from 49.2. The August composite slipped to 51.7 from 51.9. China’s CIS 300 snapped a 3-week slide last week (2.2% gain). It advanced 1.5% yesterday and gave half of it back today. Tomorrow or Thursday, China is expected to report that the decline in both exports and imports slowed.?
The markets continue to digest last week’s U.S. employment data. However, the odds of a hike later this month are less than 7%, down from nearly 23% at the start of last week. More importantly, the odds of a November hike have also fallen. The futures market shows a probability of less than 40%, down from nearly 70% last Monday. The jobs data were consistent with the labor market becoming less tight. That said, an increase in the average work week and the participation rate is not typically seen late in the cycle. However, the decline in temporary workers, and continued sharp downward revisions, and the slowing of the hourly earnings increase to 4.3%, matching this year’s low, which are the smallest year-over-year increases since June 2021, are what one would expect as the labor market cools.
Today’s economic calendar features factory orders, for which the 5.2% decline in the preliminary estimate of durable goods orders is a good tell of weakness. The decline in durable goods orders was concentrated in transportation equipment. Excluding transportation and defense, durable goods orders eked out a 0.1% gain after a 0.4% decline in June. Tomorrow sees the July trade balance deficit, the final PMI, and the services ISM. The Fed’s Beige Book, the anecdotal survey compiled in preparation for the September 19-20 FOMC meeting, will be released late tomorrow after the Boston Fed’s Collins and former St. Louis Fed’s Bullard speak. Regarding Treasury supply, it is all bills this week (about $233b without counting the 4- and 8-week bills), with the first coupon sale (three-year note) not until September 11.
Crypto Market Rundown
As of 8:45AM ET, the global crypto market cap is $1.04T, down 0.41% in the past 24h. BTC is trading around $25,750 (-0.38% in the day). ETH currently trades at $1,632 (+0.10% in the day).
During Korea Blockchain Week, Vitalik Buterin brought up the centralization "problem" Ethereum currently faces. He suggested that easing the process of running a node could fix the solution; however, he said the ideal solution may take up to 20 years.
VC Nima Capital sold 9M Synapse protocol tokens (SYN) in a single transaction, causing the price to drop by 25%.
Cronos Labs recruits for $100M accelerator program with mentors like Google Cloud, Amazon Web Services, CertiK, PeckShield, and others.
Tether is a major buyer of US Treasury bills, with an exposure of $72.5 billion globally, now above UAE, Australia, and Spain. - Paolo Ardoino, CTO of Tether.
Australia Senate Committee rejects crypto bill from Senator Andrew Bragg.
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