It’s jobs day, House set to vote on Biden plan, and virus cases surge in Europe.
Payrolls
This morning’s labor market report is expected to show the U.S.
added 450,000 jobs in October, according to the median estimate of a Bloomberg survey of economists. There will be particular attention paid to wage growth as
bond investors look for
second-round inflation effects from
higher wage demands. A high headline number, showing the labor market getting
closer to pre-pandemic levels, may also bring forward the timetable for a Fed rate rise. The unemployment rate is expected to tick lower to 4.7% and the participation rate to rise slightly to 61.7%, when the data is released at 8:30 a.m.
Vote
The House is set to vote today on President Joe Biden’s $1.75 trillion economic package and the separate infrastructure bill. Speaker Nancy Pelosi’s push yesterday to settle lingering differences seems to have been successful, with last-minute changes to state and local income tax deductions and a provision on Medicare. The infrastructure bill, already passed by the Senate, will go straight to Biden’s desk after today’s vote. The bill on the larger package will need Senators’ approval. Democratic lawmakers’ minds may have been concentrated on the need for a win this week after surprisingly bad performances for the party in votes this week.
Virus
Germany reported a record number of cases for the second day in a row as another wave of the pandemic travels across Europe, threatening to overwhelm hospitals in some hotspots. The World Health Organization warned about the accelerating outbreak saying governments should keep public-health measures in place. The rise in cases comes just before the U.S. opens its borders to European travelers next week. Yesterday the Biden administration issued a federal rule mandating vaccines or weekly testing for U.S. companies with at least 100 employees. More than 40 Senate Republicans signed on to an effort to force a vote to block the move.
Markets mixed
Global equity markets are a little quieter today as the rally slows while traders wait for U.S. payrolls data. Overnight the MSCI Asia Pacific Index slipped 0.5% while Japan’s Topix index closed 0.7% lower. In Europe the Stoxx 600 Index had gained 0.2% by 5:50 a.m., with travel stocks the worst performers. S&P 500 futures pointed to a move higher at the open, the 10-year Treasury yield was at 1.525%, and oil was under $80 a barrel after a National Security Council spokesperson said the White House is considering a range of tools to deal with prices after the latest OPEC+ decision.
Coming up…
Canada reports its October unemployment numbers at 8:30 a.m., the same time as the U.S. payrolls report. The Baker Hughes rig count at 1:00 p.m. is expected to continue the trend of small weekly rises. Dominion Energy Inc., Magna International Inc., Johnson Controls International Plc and Enbridge Inc. are among the companies reporting results.
What we've been reading
Here's what caught our eye over the last 24 hours.
And finally, here’s what Garfield’s interested in this morning
There aren’t many cool hands left across global bond markets after a wild week saw central banks unite to puncture global rate-hike bets that took flight last month. Rates traders are nursing bruises and wary of any period of fixed-income calm. Rightly so: major data points loom that could cause more convulsions amid skinny yields and risky patches of illiquidity.
October’s epic surge in short-term yields ended up setting the stage for a collapse this week when policy makers decided to demonstrate they weren’t going to be bullied into raising interest rates.
Reserve Bank of Australia Governor Philip Lowe was the first dove to sing. Playing down the most recent inflation report, he indicated traders had gone too far by pricing in multiple interest-rate hikes for 2022 given that he expects the first one in 2024. But the RBA did scrap yield curve control after that same inflation data lit a fire under short-end yields: the April 2024 note’s rate soared to eight times the central bank’s 0.1% target.
Lowe’s efforts were reinforced by Federal Reserve Chair Jerome Powell, who managed to announce the long-awaited taper and avoid anything much in the way of tantrums while doing so. Powell also stressed patience on rates and inflation.
A day later the Bank of England followed up with a stunning piece of, well, inaction. Governor Andrew Bailey faced howls of dismay as he announced no change in interest rates a mere two and a bit weeks after he warned the central bank would “have to act” to curb inflationary forces. Rabobank called it “forward misguidance.”
So, bond bears are back in their foxholes. But just about every major jobs and inflation reading for developed economies in coming months threatens to set off fresh confrontations between bond markets and central banks — which are also now among the biggest holders of sovereign bonds.
Follow Bloomberg's Garfield Reynolds on Twitter at @GarfieldR1966
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