Five Things You Need to Know to Start Your Day
Five Things You Need to Know to Start Your Day
(Bloomberg) --
Good morning. All eyes are on U.S. jobs data, the U.K.’s opposition parties are maneuvering and investors are in risk-on mode. Here’s what’s moving markets.
Jobs Watch
Investors are lurching from optimism to pessimism almost daily, driven by the latest headlines on Brexit, trade or Hong Kong. But those are only important for what they say about the underlying driver of stock and bond prices: the economy. Today we get a more direct reading with the monthly U.S. jobs report. Anticipation of a recession was heightened by an inversion of the yield curve this summer and an indicator early this week showing U.S. manufacturing is contracting, only for markets to surge yesterday. So if the U.S. did create 160,000 new jobs last month, as economists predict, it should reassure investors that growth is hanging in there. Though maybe we’re in the bad-news-is-good-news phase of market psychology, where a weaker-than-expected reading will encourage investors that the Federal Reserve will accede to Donald Trump’s wishes and slash interest rates to keep growth alive. In any case, a precursor report on Thursday looked solid. We’ll find out.
Brexit, Still
At first glance, there looks to be a bit of a lull today in the Brexit drama, with much of the action probably taking place behind closed doors. Labour party leader Jeremy Corbyn will convene a call of opposition parties for talks on Friday morning and Corbyn is discussing with the Scottish National Party’s leadership the possibility of an election late next month, with Oct. 29 the date most likely at this stage – just two days before the U.K. is set to leave the European Union. The plan is to force Prime Minister Boris Johnson to seek another Brexit delay at an EU summit Oct. 17, before any election takes place. Johnson said he’d “rather be dead in a ditch” than agree to another delay; he wants an election Oct. 15. Don’t be surprised if the lull in Brexit newsflow is short-lived.
Russia’s Doves
Russia has been one of the best-performing emerging stock markets this year, with the dollar-denominated RTS Index up 25%, and the Bank of Russia’s dovish monetary policy certainly hasn’t hurt. Economists expect Governor Elvira Nabiullina to deliver this year’s third straight interest-rate cut today, sending the key rate down by a quarter percentage point to 7%. This could be the last one for a while, says Rabobank’s Piotr Matys, because the weakening ruble threatens to drive up inflation expectations. Nabiullina struck a dovish note at the last two rate meetings, but the central bank has refrained from giving guidance before today, so market participants will be alert for any sign of a change at a press conference. Investors don’t need any more to worry about, given the fragility of global markets, so they can only hope for continued stability in Russia.
Draghi’s Decision
Over at the European Central Bank, it looks like Mario Draghi is going to go out with a bang. The European Central Bank president, who steps down next month, looks likely to override objections from some quarters and announce more quantitative easing next week to stimulate the economy, according to economists surveyed by Bloomberg. He argued in July before the ECB’s summer break that the outlook was “getting worse and worse.” Officials including Germany’s Jens Weidmann, Dutchman Klaas Knot, and Estonia’s Madis Muller are among those who have recently expressed skepticism over the need for bond buying, saying it would be disproportionate to economic conditions. Another reason to keep a close eye on today’s U.S. jobs report.
Coming Up...
Markets are finishing the week in full risk-on mode. Yields on U.S. Treasury bonds and German bunds soared Thursday along with stock prices, and Asian markets are following through with gains this morning. Before we get the U.S. jobs report, we’ll get data on July industrial production from export-reliant Germany, which is already on the brink of recession. Emerging-markets fund manager Ashmore is one of the few big names on the earnings schedule today, along with Russia’s Sberbank, French investment firm Wendel and U.K. homebuilder Berkeley. And Fed Chairman Jerome Powell speaks in Zurich on the economic outlook, though not until well after European markets have closed for the day.
What We’ve Been Reading
- The unlikely Chinese cities where house prices rival London.
- The left-wing populist who’s challenging Hungary’s strongman.
- WeWork may be a less-valuable company than Masayoshi Son thought.
- Mud-slinging election shows nothing splits Israel like Netanyahu
- Superbugs are proving deadlier than cancer for Indian leukemia patients.
- Why we can’t stop watching “Friends,” even after 25 years.
- The goalkeeper who ditched Chelsea for a job at Goldman.
To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net
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