Stocks rally on pause ahead of pivotal jobs report—Bitcoin jumps

It’s jobs Friday.

As per usual, the global markets are flat-lining ahead of the big reveal, which comes an hour before the opening bell in New York. 

In today’s “by the numbers” I get into what’s at stake in these labor numbers, plus I look closer at Goldman’s surprising about-face on stocks.

For the real price action, we have to look at crypto. Bitcoin is up nearly 6% in the past 24 hours.

Let’s see what else is moving markets. We begin in Asia.

Markets update

Asia

• Asia is mixed. Japan’s Nikkei is faring better than the others, up 0.3% in afternoon trading.
• One of the region’s best performing averages has been Bombay’s BSE, notching three consecutive all-time highs this week. Here’s why. Alas, the benchmark BSE is a touch lower this morning.
• The Delta variant is doing a job on the oil markets. Brent is headed for its worst week of the year as public transport restrictions and lockdown measures loom across China.

Europe

• The European bourses were flat at the start on Friday with the Stoxx Europe 600 up 0.05% two hours into the trading session. Insurance, tech and autos lead the way higher.
• Stoxx Europe 600 travel and leisure sector was one of yesterday’s big winners, up 1.5%. Airlines are growing steadily more bullish on a recovery to air travel in the second-half of 2021, Germany’s Lufthansa chief among them.
• Shares in AP Moeller Maersk were 1.2% higher at the open after the shipping giant, a bellwether for world trade, upped its outlook as global demand soars.

U.S.

• U.S. futures are flat, but off their lows. That’s after the S&P 500 closed at a new record high yesterday and the Nasdaq rally extended to four straight.
• Shares in Novavax tumbled nearly 10% in pre-market trading after the biotech firm delayed yet again its plan to submit its COVID-19 vaccine for “emergency” FDA approval. Novavax shares had popped on Thursday following a big new supply deal with the EU for the very same vaccine that’s yet to be approved there, too.
• The big non-farm payrolls report comes out ahead of the bell. The consensus estimate is for about +850,000 new jobs, in line with the June number.

Elsewhere

• Gold is down, trading around $1,800.
• The dollar is up a touch.
• Crude is steady, with Brent trading below $72/barrel.
• Bitcoin jumped yesterday above $40,000, and it’s holding those gains.

***

By the numbers

4,700

Exactly one month ago, I told you about Goldman Sachs’ bearish stance on stocks. While others on Wall Street were upping their forecast ahead of the Q2 earnings season, Goldman was standing pat. “We forecast that the S&P 500 will trade sideways during the next six months,” the Goldman team, led by U.S. equity strategist David Kostin, wrote in early July. Kostin figured we had reached a Goldilocks point just as the S&P reached 4,300. “Equities,” Kostin wrote then, “during the next six months are more likely to experience [more] contractions than expansions.” It was a sensible call. At that point, the benchmark index was up nearly 16% for the year. Economic growth was seen as peaking, and the interest rates and cooperate tax picture looked like headwinds for stocks. And then yesterday, Kostin & co. pulled a U-turn. In a surprising investor note, it upgraded its year-end target to 4,700, meaning the benchmark index has a further 6% in gains over the next five months. Why the change of heart? My colleague Jessica Mathews details the full story. The short answer: knockout corporate earnings and lower than expected interest rates. On cue, the S&P jumped to a new all-time high yesterday.

850K-900K

The July payrolls report is due out at 8:30 a.m. ET this morning. Economists expect a print of new jobs at somewhere between 850,000 and 900,000. There’s a huge variation in forecasts though—from 300K to 1.2 million—and that’s mainly due to the uncertainty of, yep, the raging Delta variant and the impact that’s having in red-alert states. UBS economist Paul Donovan thinks climate change, too, is a wild card as this summer’s extraordinary heat waves and wild fires may be messing with employers’ hiring strategy. Whatever the case, the jobs number is hugely consequential. If the data on new jobs and wages comes in on the high end of the spectrum, expect plenty of chatter about Fed policy, and on tapering. If the labor market returns to a state of full health—or at least well on the road to recovery—then, the argument goes, the central bank can slow its asset-buying program. A “tapering” of such financial assets would then, the thinking goes, hit stocks with shakier finances and could put the pause on this great markets rally. That’s why all eyes will be on jobs data again today. “I’ll refrain from too much hyperbole when it comes to today’s jobs numbers,” writes Deutsche Bank’s Jim Reid in an investor note this morning. “However it does have the potential to shape the taper debate over the coming months, especially as it’s the last before Jackson Hole.”

***

Postscript

The nose knows. Or so I suppose.

No, I’m not reciting Dr. Seuss. I’m talking about our truffle-training boot camp now underway up here in Amandola. As I mentioned in Tuesday’s Bull Sheet, I’ve set myself the task of training our truffle pooch, Scilla, a mop-headed lagotto romagnolo, how to hunt for these precious subterranean wonders.

My dream is she’ll become expert at rooting out these pricey fungi, giving me an excuse to pop into the woods every now and then in search of a prized truffle.

But first: there’s plenty of training to do. We’re in the early stages: imprinting. Apparently, any dog with a powerful olfactory sense can be taught to sniff out truffles. You have to start by getting the dog to identify the distinct truffle scent from other woodland odors. You do this through a series of exercises.

The first, I’d read, was to get a tug toy (a sturdy, clean sock will do) that’s infused with the scent of truffle. You gently play a game of keep-away from the dog, rewarding her with a treat each time she pulls it away from you. This builds the first association between truffle scent and the reward.

The locals here suggested I skip this step, insisting that the Lagotto was born with the truffle scent imprinted in its synapses. Just go to step two, they urged me.

And so we’ve jumped ahead, to the ovetti, or little plastic eggs that we fill with the scorzone summer truffle. We use the plastic toy-filled capsules that you find inside Kinder chocolate eggs.

Each evening I take Scilla out and discreetly hide the eggs in a spot, and direct her to find them. She gets a sliver of hot dog for each one she finds. I usually look for a clump of high grass near a tree to deposit them. I don’t make it too difficult at first. They’re concealed, but not underground. We’ll build up the degree of difficulty over time.

How’d Scilla do?

Dear reader, it’s been a promising start. Yes, she gets easily distracted by birds and butterflies (who doesn’t?), but she’s getting quicker and quicker at sniffing out the truffle-laden plastic eggs. Here’s her last night.

Next step: going underground.

***

Have a nice weekend, everyone. I’ll see you here on Monday.

***

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

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