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Five Things You Need to Know to Start Your Day - Bloomberg

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It’s jobs day, more Fed officials support tapering, and Didi to leave NYSE.

Payrolls 

U.S. employers are expected to have added 

more than 500,000 positions for the second month in a row in November. The unemployment rate is seen ticking lower to 4.5% and the average annual earnings growth per hour rising to 5%, in data published at 8:30 a.m. Eastern Time. While all monthly jobs reports are important, today’s numbers have gained extra significance after Fed Chair Jerome Powell signaled earlier this week that the central bank may accelerate the wind-down of pandemic stimulus. The data for today’s measure was collected before the omicron variant was found, something which might reduce the market reaction to a strong reading. 

Tapering 

More Fed officials have echoed the message delivered to Congress by Powell this week, saying they would support scaling back asset purchases at a faster pace. Cleveland Fed President Loretta Mester and Atlanta Fed President Raphael Bostic both said they would support completing the taper by the end of the first quarter. Treasuries remain volatile as investors digest the changing guidance, with the yield curve continuing to flatten. There was no sign of a similar change of heart in the euro area with European Central Bank President Christine Lagarde saying the prospect of a rate hike next year is “ unlikely.” 

Going home   

Didi Global Inc. said it plans to delist from the New York Stock Exchange. Shares of the ride-hailing giant jumped more than 14% in premarket trading after the announcement, which is seen as yielding to the demands of Chinese regulators. The New York listing has also brought little success to investors, with the stock dropping more than 40% since its debut in June. Didi’s move is likely to be the first of a wave of Chinese delistings from New York amid pressure from authorities in Beijing and increased scrutiny from the U.S. Securities and Exchange Commission. Didi said it plans to file for a Hong Kong listing around March.  

Markets mixed

Markets are not yet  back in rally mode, even after lawmakers in Congress secured a deal to avoid a government shutdown this weekend, while fears about the risk from omicron wane and oil rebounds. Overnight the MSCI Asia-Pacific Index added 0.1% while Japan’s Topix index closed 1.6% higher. In Europe the Stoxx 600 Index had slipped 0.1% by 5:50 a.m. with energy stocks the best performers. S&P 500 futures pointed to a move lower at the open and the 10-year Treasury yield was at 1.429%, ahead of jobs data. 

Coming up...

Canada also updates its employment situation for November at 8:30 a.m. U.S. services and composites PMIs for November are at 9:45 a.m. with ISM services for the month at 10:00 a.m. Factory and durable goods orders for October are also at that time. The Baker Hughes rig count is at 1:00 p.m. President Biden is scheduled to speak on the jobs report at 10:15 a.m. Big Lots Inc., Dole Plc and RLX Technology 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

Fed Chair Jerome Powell’s decisively hawkish pivots in front of Congress brought fresh worlds of volatility to bonds this week. Investors were whiplashed as they struggled to navigate between the Scylla of omicron-fueled virus angst and the Charybdis of U.S. policy makers signaling an eagerness to taper QE and move to hike rates. 

Fed futures traders dashed back and forth for much of the week but they are back (just about) where they were before the fresh Covid-19 variant spooked them into some wild retracements amid thin liquidity in the post-Thanksgiving twilight zone at the end of last week. The market is again pricing June 2022 as the most likely timing for the first Fed rate hike, same as on Nov. 24. At various stages over the intervening days traders looked at July, or even as late as September. 

Powell’s Tuesday and Wednesday testimony to Congress was the key driver for markets going back to betting the Fed goes sooner rather than later. His decision to retire “transitory” to describe inflation was welcomed by bond bears. That group had been left feeling very sore after the salt of pandemic resilience was rubbed into earlier wounds inflicted by central bankers pushing back on aggressive rate hike bets.

relates to Five Things You Need to Know to Start Your Day

The shift helped send bond volatility to a fresh 8-month high, based on swaptions. That also made bonds an extra source of nervousness across asset classes. Expectations for wilder price swings in Treasuries are leading the VIX fear gauge for U.S. stocks higher and setting the stage for fresh turmoil this month. 

Traditional year-end liquidity gaps, a “live” December FOMC meeting and the prospect that omicron will revive threats to growth from the virus -- infections were already surging in Europe this winter before the new variant was detected there -- all add up to a Christmas season that could be lacking in jollity for investors. The continuing debt-ceiling saga is also causing some disturbances, with short-dated bill yields jumping up and down depending on the latest tea leaves from Congress.

Follow Bloomberg's Garfield Reynolds on Twitter at @GarfieldR1966

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