Friday Oct 6 2023 11:50
3 min
Stocks firmed up a bit more in Europe ahead of the key US nonfarm payrolls report later. It follows a positive session driven by a decline in bond yields and the US dollar, whilst oil prices are heading for a sharp weekly reversal. US markets were basically flat, closing a tad lower in the wake of weekly jobless claims that didn’t move the needle for investors. Oil continues the aggressive reversal taking out another Fib level and the 50-day SMA on the way down, whilst gold continues to stabilise around the $1,820 level with the US 10yr Treasury hovering around the 4.75% area still.
We had the Jolts job openings number sparking a rout in bonds that pushed the US 10yr to a new 16-year this week, whilst the 30yr rose above 5% for the first time since the GFC. Meanwhile the UK 30yr gilt yield hit its highest since 1998. Following these sharp moves things have been a fair bit calmer as the ADP private payrolls came in soft, but the path of least of resistance is ultimately higher.
Barclays says it will take a significant stock market crash to see the bond market rally as the Fed will remain a seller and Japanese investors are pulled towards domestic bonds.
Ajay Rajadhyaksha wrote in a note with other analysts.
Nonfarm payrolls rose by 187,000 in August, while the counts for June and July were revised down. The unemployment rate was 3.8%, the highest since February 2022 as new workers arrived and failed to be absorbed. Average hourly earnings rose 0.2% month-on-month, and +4.3% from a year ago, slightly below forecasts.
Today the consensus is for payrolls to rise by 170K in September vs. 187K in August. The unemployment rate is expected to fall to 3.7% while average hourly earnings are set to remain steady at 4.3% year-on-year. But this masks a very wide range of estimates - Headline number for nonfarm payrolls ranges from 90K to 256K; unemployment rate 3.4% to 3.9%, average earnings m/m 0.1% to 0.4%.
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