Happy Friday, Bull Sheeters.
European stocks and U.S. futures are essentially flat ahead of show time. At 8:30 a.m. ET, we get the September non-farm payrolls report. It promises to be a whopper. I explain why below in By the Numbers.
Over in crypto land, the bulls are quiet today. But Bitcoin and Ethereum’s Ether have had an impressive week, pushing the alt coins to several-month highs.
Let’s see what else is moving markets as we close out the trading week.
- The major Asian exchanges are all in the green to finish the week, as trading resumes in mainland China.
- The big focus in China is on the state of the precarious property market. This morning China’s PBOC injected a fresh 10 billion yuan ($1.55 billion) in short-term funding, enough to keep investors happy. The Shanghai Composite was up nearly 0.7% in afternoon trading.
- Samsung reported its best quarterly profit in three years, helped by its chips business. Still, shares in the semiconductor giant slipped in Seoul.
- The European bourses have been under pressure all morning. After beginning the day in the green, the Stoxx Europe 600 was off 0.3% in early trading. Energy was up. Tech was down.
- A global corporate tax deal is looking more likely now that low-tax holdout Ireland, a favored tax destination of big tech firms such as Facebook, Apple and Google, has signaled it will go along with a new agreement.
- U.S. futures are trading sideways this morning. That’s after all three major averages ticked higher again on Thursday with tech stocks leading the rise.
- Before the bell we get the non-farm payrolls report for September. After impressive jobless claims yesterday, economists are calling for a change of +500,000 in new jobs and an unemployment rate of 5.1%.
- The other thing to watch is bond yields with the 10-year Treasury note sitting at 1.593% this morning. The jump in the past week has not dissuaded tech bulls.
- Gold is flat, trading around $1,760.
- The dollar is up a tick.
- The crude rally is back on with Brent trading above $83/barrel.
- Bitcoin is a tick higher, adding to its impressive gains from earlier in the week, trading around $55,000.
By the numbers
If it’s the first Friday of the month it must be gnocchi al ragù…erm, no, jobs day. After last month’s dud, economists are being a bit more cautious in their forecasting. The consensus is in the +500,000 new-jobs ballpark. Last month, the number (+235K) came in well below forecasts (+725K). That lousy print triggered the beginning of a sell-off that sunk the S&P 500 in September to its worst performance in over a year.
Today’s labor market data will be closely watched. As Deutsche Bank’s Jim Reid notes, this is the last jobs report “before the Fed’s next decision in early November, where a potential tapering announcement is likely, bar an extraordinarily poor number today, or an exogenous event in the next few weeks.” The general line of thinking is that a below-expectations number would lift the status-quo crowd—the tech stocks, namely. A strong number would boost bank stocks. What else should you be looking for in today’s report? Wage-growth numbers (an indicator on future inflation) and any indication America’s leisure sector (think restaurants that serve a decent dish of gnocchi al ragù) has rebounded. The latter has been rocked hard by Delta.
16 basis points
This week’s stocks rebound is a bit of a head-scratcher. Yesterday’s rally was led by tech. The Nasdaq has climbed 2.8% over the past two trading sessions (it’s flat in pre-market this morning) even as bond yields grind higher. The yield on a 10-year Treasury note is up 16 basis points in the past week, pushing to a four-month high. The expectation is for yields to climb another 20 or even 30 basis points by year-end, which could be a major headwind for tech stocks. As Morgan Stanley CIO Lisa Shalett wrote in an investor note last month, “investors who embraced mega-cap growth stocks on the perception that these stocks are bulletproof may be proved wrong. The group increasingly trades in line with the 10-year US Treasury yield”—meaning as yields spike, mega-cap tech stocks tend to fall. “We’ve seen the positive correlation this high once before—at the peak of the dot-com bubble.”
Crude is a cinch to notch its seventh straight week of gains. With much of the world in the grips of an energy crunch, Brent, the global benchmark, has been soaring. It topped 80 bucks a barrel in the past week, and now sits above $83 per barrel. Since August 20, the price of Brent has soared 27.5%, and that’s lifting inflation concerns and pushing energy stocks near YTD-highs. Energy is far and away the best performing sector on the S&P, up 45.4% in 2021. The S&P as a whole is up 17.1%. With more and more calls of $100 oil, this trend is likely to continue.
In the 1948 classic Ladri di biciclette, a desperate father, Antonio Ricci, searches a gritty post-war Rome for his stolen bicycle. Film buffs may know the movie as The Bicycle Thief, which won an Academy Award honor and often lands on the best films of all-time list.
The film is a giant of neorealist cinema. It’s a journey into a world where workers have few rights, there’s little justice for the working poor, and even good fathers bend the rules (or break the law) to provide for their family.
I wasn’t interested in any of those plot lines in re-watching the film this week. I’ve been looking for clues.
I feel a bit of a kinship with Ricci. As you may recall, my bike was stolen a few weeks ago. Like Ricci, I’ve been searching high and low for my pilfered Specialized Camber mountain bike. I too had a frustrating sit-down with the carabinieri when I reported the theft. The young officer on duty essentially told me you ain’t getting it back, signore.
Undaunted, I’ve been combing some seedy parts of the Internet, mainly the marketplaces on Facebook, eBay and the Italian bazaar Subito.it, looking for a bike that looks like mine. On Monday evening, I spotted one that resembled mine. Tuesday morning I checked the listing again, and grew more convinced the seller had taken a bike that looked an awful lot like mine and swapped out the seat and pedals to throw me off the trail. I then checked out his profile. The guy seemed to be an independent vendor who had sold in the past five years 292 things—who does that?, I wondered—including 16 bicycles.
Excitedly, I called up the guy who sold me my bike to fill him in on this promising lead. Together, we checked and double-checked the bike listing, comparing that bike with my own. His interest in the case got my heart racing.
About an hour later, he texted me back with some bad news. It’s not your bike, he informed. He then sent me photos pointing out a design-difference in the frame that I should’ve spotted had I not been so distracted snooping around for more detail about the seller.
Dejected, I called back my helper. He told me not to lose faith. But he leveled with me that catching a bike thief is not a job for amateur sleuths. He shared a story about a recent theft involving a dozen racing bikes stolen from a warehouse. To the best of anyone’s knowledge, those bicycles were whisked out of Italy to be sold—either in one piece or stripped down for parts—in markets where authorities really don’t care about such crimes.
He wasn’t saying my Specialized is long gone from Italy, but he advised I cast an even wider net.
At the end of The Bicycle Thief, a dejected Ricci is faced with an excruciating moral dilemma. To feed his family, he decides, he too may need to steal a bike. I don’t want to spoil the ending of the film so that’s where I’ll leave it.
As for my neorealist journey, I’m not the desperate man that Ricci was. But I really feel his pain.
Have a good weekend. But first, there’s more news below.
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Epic food and fuel shortages test a nation famous for keeping calm and carrying on—Fortune
The dollar’s dominance is far from done—Fortune
How Ozy Media, a startup with $70 million in funding and a star-studded list of investors, collapsed in 6 days—Fortune
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The TikTok Economy
My kids think newsletters are boring. They want fast-paced action. They want short bursts of information that ideally make them laugh (or feature funky new dance moves). They want something like TikTok. They're not alone. Businesses are flocking to the video-sharing social media phenomenon. What gives? Jeffrey M. O'Brien—the M is for "must read"—is on the case to explain what makes this app so addictive and so influential. It's a fascinating story.
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