Market Report.
**Last Minute Update: Non-farm employment figures show an increase of only 12,000 jobs, well below the 106,000 expected and 223,000 previously. Average earnings rose slightly in October, reaching 0.4% against 0.3% expected, while the unemployment rate remains at 4.1%. This has weakened the dollar and lowered bond yields, benefiting equity markets. The Fed has the fundamentals to continue cutting rates.
📉 Stocks fell sharply on Thursday on disappointing results from tech giants and ahead of more quarterly reports. The S&P 500 fell 1.86% and the Nasdaq fell 2.76%, its worst day since early September, while Microsoft plunged 6% and Meta fell more than 4%. Alphabet rose after strong results while AMD plunged on weak guidance.
🍏 Yesterday Apple’s Q4 revenue was $94.93B, beating estimates, but net income fell after a one-time tax charge in Europe. The tax charge lowered net income to $14.73B from $22.96B year-ago. Apple spent $29B on buybacks/dividends and has $156.65B in cash. Revenue in China declined slightly but remains a key market. Apple posted solid results led by iPhone demand but saw some revenue misses and a tax hit impacted profits.
📊 Earlier this week, we warned in this report that there would be volatility associated with the corporate results of these tech giants.
🏭 China’s private sector Caixin manufacturing PMI rose to 50.3 in October, beating estimates and signaling expansion. The PMI reading suggests recent stimulus measures from China’s central bank are working. Still an early sign and uncertainties remain around sustained momentum given competition and efficiency rates. External demand depends on US elections and global trade policies. China’s parliament meets next week and may announce further fiscal stimulus details.
📉 Japan’s government lowered its GDP growth forecast for the current fiscal year to 0.7% from 0.9%, citing weaker exports dragging on recovery. This rare mid-year revision follows a previous cut in July and private forecasts of 0.5% growth. Next fiscal year growth kept at 1.2%, showing pressure from cooling global demand and fragile domestic consumption. However, prolonged global and domestic weakness could slow the BOJ’s exit from a decade of stimulus. Attention remains on whether the BOJ can still normalize policy given risks to growth from weak exports and consumption.
💰 Japan’s rising minimum wage is likely to push up inflation mainly through higher services prices, according to the BOJ. A 1% minimum wage rise could boost services inflation by 0.07 percentage points. Labor costs rather than profits are now the main driver of GDP deflator inflation. This suggests inflation is becoming more driven by rising wages than raw material pass-through costs. Governor Ueda says rate hikes require robust demand and solid wage growth to sustain inflation. The LDP, in charge of the government, pledges a 42% average minimum wage hike by 2030 to 1,500 yen per hour.
🏡 British house prices rose 0.1% in October, slowing sharply from 0.6% in September but remaining resilient. The 0.1% monthly rise was below the 0.3% gain expected. Nationwide said the market was likely to gain momentum as borrowing costs fall, with the BoE expected to cut rates next week. The expiry of a temporary homebuyer tax break in March is also expected to boost demand over the next few months. However, an increase in stamp duty on second homes could dampen demand from buy-to-let investors. Overall, the slowdown signals some cooling in the market but rates cuts and tax policy shifts may support prices in the near term.
🇬🇧 Unfortunately, the UK manufacturing PMI has fallen back below 50, to 49.9, against expectations of 50.3 and down from 51.5 in the previous period. The virus of Europe’s recession enters the UK economy, we will see how it fights back in the next data.
📈 Today’s US Labour Market Data: In October 2024, the US economy is predicted to add 113K jobs, the fewest in six months, compared to 254K in September. In addition to strikes at Boeing and hotels in California and Hawaii, Hurricanes Helene and Milton also probably had an effect on employment. With earnings expected to grow 0.3% month over month, little less than the 0.4% gain in September, and the unemployment rate expected to remain stable at 4.1%, the annual increase will remain at 4%. In 2024, the average monthly payroll growth is 200K, up from 251K in 2023 and 377K in 2022.
Market View:
📉 Markets are trying to resume yesterday’s declines. Mini S&P 500 futures are up 5,760 points, having lost important support at 5,800 yesterday. The Nasdaq 100, meanwhile, lost 700 points from Wednesday’s highs and is now trading at 20,115 points.
💵 The dollar index remains above 104 support, awaiting US employment data. The EUR/USD trades above 1.0850 on the upside, but could lose 1.08 again if the dollar continues its upward path.
📈 US bonds continue to post bullish returns. The 10-year bond has already returned 4.30% and the 2-year 4.20%. Weak employment data, showing declines in US employment, could turn these yields around as well as knock down the dollar.
🇪🇺 In Europe, DAX 40 futures rebounded sharply from yesterday’s declines, rising almost 1% from the lows and now reaching the 19,300 point area. The EuroStoxx 50 also bounced higher, but is still far from the 5,000 point barrier, trading at 4,880.
🛢️ Crude oil continues to correct, with WTI almost reaching 71 dollars a barrel, while Brent remains stable, closing the spread in line with the predictions we made at the beginning of the week. Gold broke new highs above 2,800 dollars an ounce momentarily, and then retreated, currently holding at 2,760 dollars an ounce. Bitcoin has also retreated, but maintains the bullish structure and is trading above 70,000.
Geopolitics:
🌍 Zelenskyy blasts allies for ‘zero’ response to North Korean deployment.
🇺🇸 Trump is suing CBS for misleading editing and election interference after CBS manipulated Kamala Harris’s answers in one of her interviews, removing parts where Kamala’s response was not very positive.
🎤 Things are not going well for Harris. Yesterday, a video went viral of the disruption of a Kamala Harris rally. A man shouted ‘No more war in Gaza’.
🚀 UN Secretary General Guterres condemns North Korea’s latest ballistic missile launch and again calls for restraint. The US responds with more weapons on the table, as usual. Pentagon says US ready to support South Korea with nuclear weapons.
📝 Wall Street Journal: US officials discuss a draft agreement that would allow Israel to continue attacking Lebanon for two months before ending the war.
🛰️ Iran begins moving ballistic missiles and platforms to strategic locations.
