MARKET WRAPS
Watch For:
Employment Report for November; University of Michigan Preliminary Consumer Survey for December
Today's Headlines/Must Reads
- Double Trouble: Investors Fight Fed on Two Fronts
- Emerging Markets Appear Solid Bet to Attract Money Leaving China
- Apple Aims to Make a Quarter of the World's iPhones in India
- Luxury Stores Are Bursting With Unsold Stuff
Opening Call:
Stock futures paused on Friday ahead of a pivotal jobs report that will shed light on whether the Federal Reserve's aggressive rate-hike campaign is slowing down the economy.
What's driving markets
The Labor Department is expected to report that the U.S. added 190,000 jobs in November--buoyed by the return of striking auto workers--with an unchanged unemployment rate of 3.9% and average hourly earnings growth of 0.3%, according to the Wall Street Journal poll of economists.
"For the most part, underlying job growth has remained very resilient this year, slowing close to a still-solid pre-pandemic average around 150,000 to 250,000 per month," Citi said.
The S&P 500 is close to a 20-month high. "The reason for the newfound optimism is the widespread expectation that the Fed has finished its job, " the AdvisorShares Focused Equity ETF said.
Next week may be equally important, with key inflation data, Treasury auctions and a Fed interest-rate decision.
Overseas
Global stocks were subdued, with indexes in Hong Kong and Shanghai relatively calm and the Stoxx Europe 600 also little changed.
Stocks to Watch
The U.K.'s Competition and Markets Authority said it is investigating whether the partnership between Microsoft and OpenAI will impact market competition.
Microsoft said it will work closely with the CMA to provide all the information it needs.
Forex:
The monthly jobs data will be watched to gauge whether markets are justified in pricing in a first interest-rate cut as early as March, and a figure in line with consensus could lift the dollar, MUFG said.
"A consensus print or better could see some of the March 2024 easing come out of the market."
That could give a boost to U.S. bond yields and the dollar into the close of this week and ahead of next Wednesday's Federal Reserve decision, it added.
November non-farm payrolls are expected to rise by 190,000, according to a WSJ poll.
USD/JPY is likely to extend its downtrend , based on technical charts, UOB Global Economics & Markets Research said, noting the currency pair's plunge on Thursday.
Bonds:
The bond rally will likely fade as central banks might start cutting rates later than some market pricing suggests, Societe Generale Research said.
"With inflation still high, global central banks are likely to keep policy restrictive for as long as they can. In this context, we believe the rally in bonds will likely run out of steam," SocGen said, adding that any meaningful reversal, however, would be an opportunity to reinitiate longs.
Energy:
Oil futures were close to 2% higher ahead of the U.S. jobs report. Despite the lift, prices remained on course to close the week 4% lower, with the market reacting poorly to OPEC's supply cut last week.
"Weaker demand data from China has further weighed on the sentiment in the short term," according to ING.
Metals:
Copper prices edged up while gold held steady ahead of the U.S. jobs report.
Commonwealth Bank of Australia expects the labor market to cool, forecasting 150,000 jobs to be added to the economy and unemployment rate of 4%, compared to the consensus of 183,000 and 3.9% respectively.
A softer than expected report would likely cement expectations for the Fed to cut rates in the first half of 2024, CBA said.
"The dollar can lift if markets grow more concerned about a U.S. recession and risk sentiment deteriorates," it added.
Citi predicts the shock to growth from rate increases in developed economies is not yet over, and that this should support precious metals prices, weigh on crude oil and cause head winds for base metals and iron ore.
Citi said it was bullish on gold and silver, "viewing them as safe havens amid an expected developed markets recession and their positive correlation with China's easing."
Although, there might be reasons for optimism in industrial commodities until Lunar New Year in February, due to anticipated support from China easing measures, it said.
TODAY'S TOP HEADLINES
Toshiba, Rohm to Invest $2.69 Billion to Make Power Devices in Boost to Japan Chip Industry
Toshiba and electric-parts company Rohm will invest $2.69 billion in a venture to produce power devices, a move aligned with Tokyo's drive to ensure a stable supply of semiconductors in Japan.
The Japanese companies said Friday they will spend a combined 388.3 billion yen ($2.69 billion) to boost production capacity of silicon carbide and silicon power devices, components used for supplying and managing power in parts such as electric-vehicle powertrains.
KKR Bids $1.6 Billion for U.K.'s Smart Metering Systems
Buyout firm KKR & Co. agreed to acquire London-listed Smart Metering Systems in a play to bolster renewable energy in Britain through a transaction that values the company's equity at about GBP1.3 billion, or $1.63 billion.
The Glasgow, Scotland-based company's technology includes electricity meters, utility-scale storage batteries and electric vehicle charging systems, all of which attracted the New York firm, according to a person familiar with the transaction.
Hiring Is Cooling From Earlier This Year. What to Watch in Friday's Jobs Report.
The November employment report will add to recent signs that the labor market and economy are slowing heading into 2024, analysts estimate.
Bitcoin Holds Above $43,000 as Crypto Rally Pauses. Jobs Data Could Be a Catalyst.
Bitcoin and other cryptocurrencies were little changed on Friday, pausing near the peak of a rally that pushed prices to 20-month highs in recent days. The U.S. jobs report looms as a macroeconomic catalyst that could move cryptos in the day ahead.
The price of Bitcoin shed 1% over the past 24 hours to $43,250, with the largest digital asset retreating further from its recent peak above $44,000-which marks the highest level since April 2022, before cryptos plunged into a brutal and prolonged bear market. Bitcoin has gained some two-thirds since mid-October, snapping out of a multi-month stretch of subdued crypto trading and sparking calls for a new bull market.
Biden's Foreign-Policy Legacy Is Now Intertwined With Border Crisis at Home
WASHINGTON-The fate of President Biden's foreign-policy legacy is now tied directly to one of his biggest domestic political liabilities, the border crisis, as lawmakers hurry to reach a deal to funnel aid to Ukraine and rewrite the country's immigration rules.
Lawmakers went back to the negotiating table Thursday after Senate Republicans on Wednesday blocked a Democrat-backed $110.5 billion emergency foreign-aid measure that would have sent funding to Ukraine, Israel and the Indo-Pacific, saying the package needed significant changes to border policies. Republicans have since presented a counteroffer.
Hunter Biden Indicted on Tax Charges
Hunter Biden was indicted on nine tax charges Thursday, in a case that adds a new layer of legal peril for President Biden's son as he faces continued congressional scrutiny and a separate prosecution on felony gun charges.
The indictment from a grand jury seated in Los Angeles sets up another case with the potential for a trial coinciding with the president's re-election campaign.
Border Talks Restart as Christmas Deadline Approaches
WASHINGTON-Bipartisan talks on a border-policy overhaul resumed on Thursday, as top Senate negotiators met to try to jump-start progress toward a deal seen as critical to winning Republicans' support for a new tranche of urgently sought funds for Ukraine.
On Wednesday, Republicans blocked a $110.5 billion emergency foreign-aid measure backed by President Biden and Democrats that would have sent funding to Ukraine, Israel and the Indo-Pacific, saying they wouldn't back such a package unless it was accompanied by significant policy changes to curtail record-high illegal crossings at America's southern border.
California Faces Record $68 Billion Budget Deficit
California is facing a $68 billion budget deficit next fiscal year-its largest ever-because of plunging revenues including a steep drop in personal income tax collections.
According to estimates released by the nonpartisan Legislative Analyst's Office Thursday, projected state revenues through the 2024-2025 fiscal year are $58 billion lower than assumed in the $310 billion state budget passed by the Democratic-controlled legislature and signed by Gov. Gavin Newsom, also a Democrat, in June.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
Canadian Western Bank 4Q
Economic Calendar [ET]:
0830 3Q Industrial Capacity Utilization Rates
Stocks to Watch:
Hydro One Announces Additional Offering of Medium-Term Notes Under Sustainable Financing Framework; Prices Additional C$100M of 4.85% Notes Due 2054; Fresh Offering Brings Sustainable Notes Amount to C$500M; to Allocate Amount Equal to Note Proceeds to Green Projects
Yooma Wellness Files for Bankruptcy; Yooma Is a Wellness Platform, Including CBD Products and Other Wellness Brands
Expected Major Events for Friday
00:01/UK: Nov KPMG and REC UK Report on Jobs
04:30/JPN: Nov Corporate Insolvencies
05:00/JPN: Nov Economy Watchers Survey
07:00/GER: Nov CPI
08:59/JPN: Oct Provisional Labour Survey - Earnings, Employment & Hours Worked
09:30/UK: Nov Bank of England/Ipsos Inflation Attitudes Survey
13:30/US: Nov U.S. Employment Report
13:30/CAN: 3Q Industrial capacity utilization rates
15:00/US: Dec University of Michigan Survey of Consumers - preliminary
17:00/US: World Agricultural Supply & Demand Estimates (WASDE)
(MORE TO FOLLOW) Dow Jones Newswires
12-08-23 0620ET
