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Happy Friday, Bull Sheeters. It looks as if the equities rally will be snapped today as U.S. futures point to a rough open. Investors are on edge after President Trump signed executive orders on Thursday evening against Chinese tech giants Tencent and ByteDance’s TikTok, signaling a dramatic escalation in trade tensions between the two economic powers. Jitters over today’s jobs report isn’t helping investor sentiment.
It’s shaping up to be a risk-off day.
Let’s check in on the action.
Markets update
Asia
- The major indexes are all in the red, with the Hang Seng leading the way lower, down 1.7% in afternoon trade.
- At one point on Friday, investors wiped $46 billion off Tencent’s market cap following President Trump’s executive order barring U.S residents from doing business with the popular social media platform within 45 days. Trump unveiled a similar order targeting TikTok.
- The Trump Administration isn’t done there. It’s also looking to push through a long-sought order granting American regulators access to the audit books of Chinese companies that list on U.S. exchanges.
Europe
- The European bourses were mostly flat at the open. The benchmark Stoxx Europe 600 was down 0.1% a half-hour into the trading session.
- Germany, the engine of the EU, saw a record jump in factory orders in June. It’s an encouraging sign that, even though German manufacturing output is below pre-crisis levels, the recovery is in full swing. In an investor note this morning, analysts at Berenberg said the German economy is recovering “faster than we had initially expected.”
- More gloom for the airlines sector: Germany’s Lufthansa doesn’t see a recovery in commercial aviation before 2024, and that it will have to cut jobs to weather the crisis.
U.S.
- U.S. futures look set to snap the impressive week-long rally across the major exchanges. The futures dropped sharply after Trump announced the executive orders on Chinese tech firms.
- The big jobs report comes out before the bell and economists are expecting the economy will have added 1.48 million jobs to bring the unemployment rate to 10.6%. Analysts are warning a miss could jolt the markets. Those jitters are weighing heavily on futures at the moment.
- Washington has set itself a Friday deadline to reach a deal on a new stimulus package and there’s still little progress. Trump says he’ll sign an executive order if a deal isn’t reached.
Elsewhere
- Gold is flat, but not for long. It’s on a record run.
- The dollar is up.
- Crude is down, with Brent trading above $45/barrel.
By the Numbers
1.48 million. The estimates on today’s non-farm payrolls report are all over the place, with the consensus coming in at a tick below 1.5 million new jobs added in the past month. (The so-called “whisper number” is worse: 1.1 million jobs). If the consensus number proves correct—a big IF—that would send the unemployment rate lower by a half-point to 10.6%. Investors are a bit on edge over this report. Yesterday’s jobless claims numbers came in at a slightly better 1.2 million, but it still marked the 20th straight week in which more than 1 million Americans filed for unemployment insurance. Most market observers have given up on the V-shaped recovery narrative. The question is: at what point will that realization sink market sentiment?
11,108. Yes, tech bulls. That’s the Nasdaq’s closing price yesterday (give or take a few fractions of a penny). The Nasdaq’s current rally is at seven straight. Trump’s tech trade war looks set to snap that string. Still, the tech-heavy exchange is up 7.4% in the past 30 days, and nearly 24% YTD. In closing above 11,000 mark, the Nasdaq passed an important psychological hurdle, says Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance. “Momentum typically takes on a life of its own, so we’re unwilling to metaphorically ring the bell that the top is in in technology stocks,” he says. “If anything, they are likely to keep going up for longer – but we are increasing our level of caution and are looking at other areas of the market that may provide better risk/reward at this point like industrial or even certain financial companies.”
36. Gold is up 36% YTD, setting fresh records just about every day. As we discussed here yesterday, that trend looks to continue as long as central banks are printing money and lawmakers are green-lighting trillion-dollar bailout packages. What’s the next stop? $2,500? $3,000?
***
Postscript
The Bull Sheet newsroom has been sharing space with my wife’s foundation since the start of the lockdown in March. It’s tight quarters. While it’s been business as usual for me this week, it’s been crisis management of the worst kind for my wife.
She’s been working round-the-clock, conducting conference calls and Zoom meetings in English, Italian and French. The crisis? Beirut. And specifically, how to get vital supplies and funds to the Saint Antoine Dispensary as a humanitarian crisis threatens a city that was already on the verge of economic collapse.
The Saint Antoine Dispensary is a health clinic that sits in Roueissat, in the northwest section of Beirut. It’s been providing vital free health care to locals since the late 1980s, at the height of the Lebanese civil war. (I first learned about the story of Saint Antoine Dispensary about a decade ago, and even rounded up a filmmaker and crew to bring the story to the screen. But, alas, that documentary project fell through. Some day, I tell myself.)
In 2005, the Good Shepherd Sisters took over the clinic just as much of Lebanon was being overwhelmed by refugees, mostly Iraqis who’d lost just about everything during the war in their country. In a cruel twist, a few years later the cycle would repeat itself, this time with Syrian civil war refugees streaming over the border with their families and little else.
The modest little clinic in the hills of Roueissat has an open-door policy. It operates out of a Shia neighborhood, but, in classic Beirut style, provides health care to all faiths—more than 6,000 families in all.
The early reports we were getting out of Roueissat were heartbreaking—even from a city that’s all too familiar with heartbreak. Homes were destroyed. Food was scarce. The air was unsafe to breathe. Tempers were flaring as all faith—whatever meager trust there was—in the government was blown away by Tuesday’s deadly explosion. Meanwhile, the medical needs of the community were, and still are, skyrocketing.
I’ve been debating the past few days whether I should even share this story about Beirut here in Bull Sheet. There’s a clear conflict of interest in me using this space to mention the clinic and the people of Roueissat. This is my wife’s job. And this is a tragedy involving people I care deeply for.
This has been a rough year, and I think what makes the “Postscript” work is that it’s become a good place for me to share my thoughts and observations, the things that get me through the tough times. But I can’t stop thinking about Beirut, and I feel a bit powerless to help in any meaningful way beyond saying this:
Please consider donating to the Lebanese Red Cross, the Good Shepherd International Foundation, or other organizations doing crucial work in Lebanon at this time.
I promise to have a more uplifting Postscript or two (or more) next week.
Until then…have a nice weekend, everyone. Stay safe.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
***
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Beware the vaccine. That's the message from Goldman Sachs analysts who warn that a COVID-19 vaccine breakthrough could seriously mess with the markets in ways most investors aren't calculating. Here's how.
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