November 1 – Stock futures firmed overnight ahead of today’s jobs report, pulled back when the initial numbers hit, but then pushed higher once again, despite seeing some very low numbers. The VIX is trading near 22 this morning, while the dollar index is trading near 103.9. Yields on 10-year Treasuries dropped sharply following today’s jobs numbers to trade near 4.27%, while yields on 2-year Treasuries trade near 4.11%. The broader commodity sector found support again overnight, with crude oil prices probing above $71 per barrel, while the grain and oilseed sector was mostly higher as well. Sharp gains in palm oil supported more strength in soyoil.
The economy created a net 12K jobs in October – that’s all – according to this morning’s monthly jobs report. In fact, the government reports that the private sector saw a contraction of 28K jobs in October, with manufacturing losing 46K jobs. This is in contrast to the ADP report on Wednesday that showed that the private sector created 233K jobs. This morning’s October number compared to the average trade estimate of 125K jobs created, with 90K of those being in the private sector. We should note that the September number was revised to 78K, down from the 254K originally reported. Healthcare still managed to add 52K jobs in October, while government added another 40K jobs, while professional and business services cut 49K, and manufacturing cut the forementioned 46K. The report notes that this is the first survey collected since Hurricanes Helene and Milton struck the Southeast. Yet, the report notes that no changes were made to either the establishment or household survey procedures for the October data, and that it is likely that payroll employment estimates in some industries were impacted by the hurricanes. However, it was unable to quantify the net effect on the over-the-month change in national employment, hours, or earnings estimates because the establishment survey is not designed to isolate effects from extreme weather events, leaving us to merely speculate.
The unemployment rate remained unchanged at 4.1% in October, with the labor participation rate ticking lower to 62.6%. Average hourly earnings grew by 0.4% month-on-month in October, up from a downwardly revised 0.3% the previous month. Average hourly earnings were up 4.0% year-on-year in October, up from a downwardly revised 3.9% in September. This provides more indication of lingering wage inflation. The average workweek increased to 34.3 hours in October, up from 34.2 hours the previous month. Treasury yields dropped notably following the data release on ideas that the Fed will need to be more aggressive with rate cuts to support the jobs market, although the lingering wage inflation concerns limited the scope of rate cut enthusiasm.
Crude oil prices continue to move higher following reports that Iran is preparing for another strike on Israel, possibly ahead of the U.S. elections on Tuesday. Gains are limited by thoughts that any additional strikes might be restrained in an effort to minimize the risk of further escalation. Nonetheless, news website Axios reported late yesterday that it had confirmed from two Israelis intelligence sources that Iran is preparing to attack Israel from within Iraq within days. The primary risk continues to be that escalation would reach the point of negatively impacting energy production and shipping infrastructure in the Middle East. Gains today are thus far rather mild, suggesting that traders are merely positioning for the possibility of a more significant attack ahead of the weekend when the markets would be closed, leaving them vulnerable if they are leaning in the wrong way with their positions.
The share of global payments in yuan fell to 3.61% in September, according to the latest data from the SWIFT banking system, down from its peak at 4.74% in July, making it the fifth most used currency. However, it’s unclear whether that reflects a move away from the yuan, or merely a shift toward using alternative payment systems that China and Russia have been pushing among BRICS and Belt and Road Initiative participants. China continues to actively promote the yuan through alternative systems, with mBridge – a blockchain-based cross-border payment system – being one of those alternatives. The West-backed Bank for International Settlements (BIS) unexpectedly pulled out of its involvement with mBridge, removing one way that we had for monitoring its use. As such, this could promote a further fracture of the existing global payments system with less visibility on global transactions.
Soymeal stocks in China pushed above 1 million metric tons in the past week, it’s highest level in five years, easing concerns about tight supplies due to soybean unloading issues at ports. Soybean stock levels at the ports are at a high 7.8 mmt. China crushed a high 2.14 mmt of soybeans last week, up 10.7% over the previous year’s pace, mostly due to the strong flow of soybeans from Argentina and Brazil. An active rain pattern in Brazil brought an end to the drought, raising production expectations for the current growing season. The rains are thus far seen as beneficial and not problematic for the crop, increasing farmer willingness to sell on price strength.
