By Geoffrey Smith
Investing.com -- It's time for the monthly U.S. labor market report, and half a million Americans are expected to have found work last month. Recent data suggests the risk is for an upward surprise. Stocks are rangebound until the release at 8:30 AM ET (1230 GMT), but bond yields are keeping the pressure on, hitting new highs overnight. Tesla (NASDAQ:TSLA) is leaving California, and the world's energy markets continue to run riot with shortages from Europe to India and China. Here's what you need to know in financial markets on Friday, 8th October.
1. Payrolls to cement expectations of Fed tapering
The U.S. labor market report for September is due, and it will take a major disappointment on the hiring front to shift a consensus that the Federal Reserve will start reducing its bond purchases in November.
Analysts expect the U.S. economy to have added 500,000 nonfarm jobs in the month through mid-September as the country emerged from a soft patch for hiring due to the summer wave of Delta-variant Covid-19. The risk of a surprise appears slightly skewed to the upside, given that ADP’s estimate of private-sector hiring - at 568,000 – was over 100,000 more than the estimates embedded in consensus for today.
Average hourly earnings growth, another key variable, is expected to slow to 0.4% on the month, but to accelerate in annual terms to 4.6%.
2. Crisis? What crisis? (China redux)
China’s markets and factories reopened in largely positive mood after the extended Golden Week holliday, with few signs that the credit crunch among its real estate sector is affecting sentiment elsewhere.
The People’s Bank of China was able to dial down its daily open market operations without causing any undue volatility. Benchmark equity indices advanced broadly, gaining as much as 2.1%.
However, signs of emergency measures to deal with a looming energy crisis continue to spread across the economy. The government ordered local coal miners to increase production capacity by 72 million tons a year in a development that once again highlights the disparity between Beijing's environmental promises and its near-term economic priorities.
3. Stocks set to open mixed as bond yields touch new highs
U.S. stock markets are poised to open in tight ranges ahead of the payrolls release, but may come under some pressure from the bond market, where yields on both 5-Year and 10-Year benchmark Treasuries continued to rise overnight. The 5-year touched 1.05%, while the 10-year briefly topped 1.60%.
By 6:15 AM ET (1015 GMT), Dow Jones futures were up 27 points, or less than 0.1%, while S&P 500 futures were flat and Nasdaq 100 futures were down by 0.1%. All three indices are still on track for a weekly gain, however, supported by relief at the passing of a bill to suspend the U.S. government debt ceiling until December.
Stocks in focus later will include Life Time Group (NYSE:LTH), after a relatively weak debut on Thursday. The earnings slate is empty as the market prepares for the start of the third-quarter earnings season next week.
4. Tesla joins California exodus
Tesla is to move its headquarters from California to Austin, Texas, CEO Elon Musk said after a shareholder meeting on Thursday.
The company is the latest to relocate away from the country’s traditional tech hub in search of more affordable real estate and shorter commutes. At least, that’s how the company presents the move.
Tesla’s relationship with California has been strained for some time already, Musk chafing in particular at “fascist” social distancing measures imposed by state health authorities at the height of the pandemic’s first wave last year.
Well, at least the energy supply is more reliable in Tex- oh no, wait...
5. Oil hits new 7-year high as coal and gas shortages continue
U.S. crude futures touched seven-year highs while Brent futures hit three-year highs as global energy markets continued to run riot due to shortages in China, Europe and, increasingly, India.
Power rationing has spread across India as the country’s utilities have been unable, or unwilling, to pay sky-high import prices for thermal coal in a region-wide scramble for fuel.
In China, meanwhile, the shortage of natural gas accentuated by a fire on the new pipeline carrying gas from Russia’s eastern Siberian fields. Although this pipeline has little immediate impact on key demand centers along the eastern and southern seaboards, it comes at a time when any shortfall is acutely felt.
In Europe, meanwhile, Natural Gas Futures continued to tick up in the absence of action to match Russian President Vladimir Putin’s offer of increased supplies earlier in the week.