Traders eye key US jobs report

Stocks down

Stocks fell ahead of the US nonfarm payrolls data, which is looking like it will create a good deal of volatility whatever way it falls. Bad news is good news as far as the market is concerned – lower payrolls will raise hopes the Fed will pivot earlier. A strong number will increase pessimism, such is the strange situation we find ourselves in.

European stocks looked to extend losses from Thursday’s soft session early on Friday, though traders seemed to be cautious ahead of the labour market data and we saw action either side of the flat line on the main bourses. Wall Street closed down on Thursday, with the S&P 500 off by one percent and the Dow Jones down a similar amount as investors tried to make sense of the volatility in the bond market. Rates moved up with the US 10yr above 3.85% and the 2yr north of 4.2% again. Energy stocks rallied along with oil prices following the OPEC+ cut. Nevertheless, the major US indices are set to close the week up more than 4%, a decent start to Q4 after a bruising September.

NFP day!

Expectations are for 250k jobs being added, with the unemployment rate unchanged at 3.7% and wages steady at +0.3% month-on-month. Weekly unemployment claims rose to 219k from 203k expected, data yesterday showed. This came after the weak JOLTS figures – the pivot bulls will be hopeful, but the message from the Fed is clear enough. Weak payrolls number today should see spike in US futures, but the longer-term trend remains – the bottom isn’t in even if there are some nasty rips higher.

Fed pivot?

Fed officials are not for turning. Mester: “We have to be singularly focused on inflation”, and Waller: “I anticipate additional rate hikes into early next year, and I will be watching the data carefully”. And, this also from Waller: “I've read some speculation recently that financial stability concerns could possibly lead the FOMC to slow rate increases or halt them earlier than expected. Let me be clear that this is not something I'm considering or believe to be a very likely development.”

Rates volatile

Rising real rates in the US again are providing the lift for the dollar, with the 10yr TIPS back above 1.65%. That’s not quite at last week’s high but is a sharp reversal from the 1.36% touched earlier this week. These remain big moves in the TIPS market and we are seeing considerable volatility across bond markets in the wake of the UK Budget still. On that subject, gilt yields keep pushing higher again with the 30yr above 4.35%, up from around 3.6% or so at the start of the week. Not quite on the scale of the mini-Budget blow-up, these are still chunky moves in the gilt market – the worries persist. All this is fuel for the dollar - EURUSD fell under 0.98 and GBPUSD is back to 1.1150.

Elon

The Twitter deal is going ahead, right? Well this is Musk, so it’s hardly a surprise that when he says he’s actually going to proceed with the deal it may not be entirely truthful. The court has granted a delay but wants the deal done by the end of Oct or Musk is on the stand in November. Twitter is rightfully wary: Musk’s lawyers are now saying that the deal is contingent on the $13bn debt financing from a group of major banks – this is new. You either have the debt or do not, it’s not an offer to buy Twitter that has been agreed, but the actual purchase. This is more chicanery. And of course Musk now says that Twitter – which has not just dropped the case because they have his word he’ll buy it – are being tricksy. "There is no need for an expedited trial to order defendants to do what they are already doing," Musk's lawyers wrote in a filing. "Yet, Twitter will not take yes for an answer. Astonishingly they have insisted on proceeding with this litigation, recklessly putting the deal at risk and gambling with their stockholders interests." Twitter shares fell almost 4% to $49.39, around $5, or 10%, below the offer price – investors share the Twitter board’s unease.