Let's start with good news. The US labor market flexed its muscles in September, adding 143,000 jobs, outpacing the forecasted 120,000. This robust performance, reported by ADP, follows an upward revision of August's figures to 103,000. The official employment report from the Department of Labor, due on Friday, will provide further clarity.

Meanwhile, China continues its economic rally, buoyed by recent growth-boosting measures. Asian markets have responded positively, in stark contrast to the jittery US and European markets. As we approach the first anniversary of the Hamas attack on Israel, the third-quarter corporate earnings season, and the US presidential election, market tensions are palpable. 

Yesterday, financial markets were cruising towards a routine session until geopolitical tremors shook the scene. By mid-morning, whispers of an Iranian counterstrike against Israel’s latest offensives in Lebanon turned into reality. Tehran launched between 180 and 200 missiles at Israel, with attackers claiming a 90% hit rate. Israel, on the other hand, asserted it intercepted most missiles and vowed retaliation. For now, the conflict remains a long-distance affair, given the 1,500 km and multiple borders separating Tehran and Tel Aviv. Yet, the region’s tension has ratcheted up, prompting investors to revert to their age-old risk-averse habits: the dollar, bonds, and gold surged, while defensive equities like health and utilities took a backseat. Oil and arms stocks also saw a boost, given the Middle Eastern backdrop and military nature of the crisis. The prevailing investment trifecta—tech stocks, falling interest rates, and a recent rebound in China—has been disrupted by geopolitics. While tensions in China and Taiwan and the war in Ukraine have been simmering, the Middle East’s worsening situation adds another layer of risk.

Adding to the market’s current volatility are the upcoming quarterly earnings season, starting next week with PepsiCo, JPMorgan Chase, Wells Fargo, and BlackRock, and the US presidential election on November 5. Yesterday’s debate between Kamala Harris' running mates and Donald Trump yielded no significant developments, with JD Vance, Trump’s protégé, slightly edging out Tim Waltz in a rather tepid performance.

In labor news, dockworkers have intensified their strike for higher wages, causing significant disruptions at US ports. This timing is particularly critical as it coincides with the festive season’s stock replenishment. Prolonged industrial action could impact availability, prices, and freight rates.

Nike reported its earnings yesterday, revealing a financial crisis compounded by the CEO’s departure. The new management team faces a daunting task and has already scrapped the Group’s annual targets to start afresh.

In the Asia-Pacific region, Japan tumbled 2.1%, erasing much of the previous day’s gains. Mainland China remains closed for Golden Week, but Hong Kong continues to fuel the buying frenzy, with the Hang Seng up another 6%, driven by the property and financial sectors. Investors remain optimistic about China’s recovery following Beijing’s recent stimulus measures. Middle Eastern tensions seem to have little impact on Chinese equities. South Korea remains sluggish (-1.2%), while India hovers around equilibrium, mirroring Australia’s performance. European indices are slightly bearish, with the Stoxx Europe 600 down 0.1%, and Wall Street futures are treading water.

Economic highlights:

The ADP employment change and DOE crude oil inventories are the focus of attention. The full agenda is here. 

The dollar jumped to EUR 0.9041 and GBP 0.7530. The ounce of gold is up to USD 2,646. Oil soared, with North Sea Brent at USD 75.49 a barrel and US light crude WTI at USD 71.65. The yield on 10-year US debt is up to 3.79%. Bitcoin is down to USD 60,900.

In corporate news:

  • Nike abandons its annual forecasts following results that were down but less negative than expected. The stock lost 6% in after-hours trading.
  • PepsiCo acquires Siete Foods for $1.2 billion.
  • Apple is preparing a new iPhone SE and an improved iPad Air for early next year, Bloomberg.
  • KKR reportedly has its eye on ASMPT (a quarter-owned subsidiary of ASM International ), according to Bloomberg.
  • Boeing plans to raise at least $10 billion via a capital increase.
  • Microsoft is adding features to its consumer artificial intelligence assistant.
  • Oracle to invest $6.5 billion to set up cloud facilities in Malaysia.
  • General Motors reports a 2.2% fall in US vehicle sales in the third quarter.
  • Eli Lilly plans to test weight-loss drugs on people of normal weight.
  • Peloton wins shareholder lawsuit over post-pandemic financial forecasts.
  • DeepMind and BioNTech create AI lab assistants for scientific research.
  • Accenture completes purchase of German healthcare consultancy consus.health.

Analyst recommendations:

  • Arthur J. Gallagher & Co.: Autonomous Research downgrades to underperform from outperform with a price target raised from USD 271 to USD 275.
  • Booz Allen Hamilton Holding Corporation: JP Morgan downgrades to underweight from neutral with a price target raised from USD 154 to USD 158.
  • Diamondback Energy, Inc.: Barclays upgrades to overweight from equalweight with a target price reduced from USD 216 to USD 210.
  • Ge Vernova Inc.: Raymond James downgrades to market perform from outperform.
  • Harley-Davidson, Inc.: Baird downgrades to neutral from outperform with a price target reduced from USD 44 to USD 40.
  • Hunt (jb) Trans: Zacks upgrades to neutral from underperform with a price target raised from USD 141 to USD 191.
  • Ibm: DZ Bank AG Research downgrades to hold from buy with a price target raised from USD 210 to USD 215.
  • Kellanova: Argus Research Company downgrades to hold from buy.
  • M&T Bank Corporation: Evercore ISI upgrades to outperform from in-line with a price target raised from USD 187 to USD 210.
  • Occidental Petroleum Corporation: Goldman Sachs upgrades to neutral from not rated with a target price of USD 55.
  • Pbf Energy Inc.: JP Morgan downgrades to neutral from overweight with a target price reduced from USD 53 to USD 40.
  • Range Resources Corporation: Barclays upgrades to equalweight from underweight with a target price reduced from USD 35 to USD 34.
  • Science Applications International Corporation: JP Morgan upgrades to overweight from neutral with a target price raised from USD 150 to USD 170.
  • T-Mobile Us, Inc.: Raymond James upgrades to outperform from strong buy with a target price raised from USD 208 to USD 221.
  • The Home Depot, Inc.: Gordon Haskett upgrades to buy from accumulate with a price target raised from USD 360 to USD 450.
  • Transocean Ltd.: Carnegie Group downgrades to hold from buy with a price target reduced from USD 7 to USD 4.50.
  • Whirlpool Corporation: Zacks upgrades to neutral from underperform with a price target raised from USD 92 to USD 113.
  • Five Below, Inc.: Craig-Hallum maintains its buy recommendation and raises the target price from USD 102 to USD 125.
  • Halliburton Company: ATB Capital Markets Inc. maintains its sector perform recommendation and reduces the target price from 48 to USD 38.
  • New Fortress Energy Inc.: Capital One Securities maintains its equalweight recommendation and reduces the target price from 17 to USD 10.
  • Nov Inc.: ATB Capital Markets Inc. maintains its outperform recommendation and reduces the target price from 31 to USD 22.
  • Paychex, Inc.: Deutsche Bank maintains its hold recommendation with a price target raised from 116 to USD 140.
  • Stellantis N.v.: Stifel maintains its buy recommendation and reduces the target price from 23 to EUR 15.50.
  • Super Micro Computer, Inc.: Barclays maintains its equalweight recommendation and reduces the target price from 438 to USD 420.
  • Symbotic Inc.: Deutsche Bank maintains its buy recommendation and reduces the target price from 59 to USD 31.
  • Transunion: Wells Fargo maintains its overweight recommendation and raises the target price from USD 100 to USD 125.