Jobs data continues to confuse but… 

Thoughts of the Day

The US Non-farm Payrolls exceeded expectations, adding +199K jobs (EXP +180K, PREV +150K). Despite a higher Labor Force Participation rate, the Unemployment Rate unexpectedly dropped to 3.7%, the lowest since July. Although perplexing, the positive news is that inflation expectations, as measured by the University of Michigan Consumer Sentiment survey, have fallen.

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Week Ahead

Monday:

Tuesday: UK Labour (Claimant Count Change – no expectations given). 

The US Consumer Price Index is expected to show that prices rose +3.1% Year-on-Year in November, a tad lower from +3.2% previously. The core index is expected to show that prices rose +4% in November as it did in October.

Wednesday: The US Producer Price Index is expected to show that prices rose +1% YoY in November, down from +1.3% in October. The core index is expected to show that prices rose +2.3% compared to +2.4% previously.
The Federal Reserve will likely keep interest rates at 5.5% in its policy meeting.

Thursday: Australia is expected to see 0.8k jobs added to its economy while the unemployment rate is expected to rise to 3.8% from 3.7%.
The Swiss National Bank is expected to keep interest rates at 1.75%.
The BoE is expected to keep interest rates at 5.25%.
The ECB is expected to keep interest rates at 4.5%.
US Retail Sales is expected to decline -0.1% Month-on-Monthly as it did in October.

Friday: Purchasing Managers Indices data from the US, UK and EU is slated to be released.

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What Happened Yesterday

Market Movements as of New York Close 8 Dec 23 (10 Dec for Crypto)
  • The US Nonfarm Payrolls showed that +199k jobs were added to the economy in November (vs +180k jobs expected), up from +150k previously. The unemployment rate fell to 3.7% (vs 3.9% expected and previous). Average Hourly Earnings continues to grow at +4% Year-on-Year as expected while the labour force participation rate grew to 62.8% from 62.7%. The NFP data diverged from the weaker ADP and JOLTS labour data earlier in the week. While it reduced the expectations of an interest rate cut by the Federal Reserve early next year, it increased the chances of a soft landing as well.
  • The preliminary print for the University of Michigan Consumer Sentiment came in at 69.4 (61.8 exp, 61.3 prev) while inflation expectations for the year ahead declined to 3.1% from 4.5% previously. The 5 Year Inflation Expectations also fell to 2.8% from 3.2% previously.
  • The US Treasury Yield curve inversion widened to 0.48% as the US 2-year bond yield spiked +0.13% to 4.71% while the 10-year bond yield rose +0.09% to 4.23%.
  • The US stock futures traded within a small range through the Asian and London trading sessions. However, some downward momentum was seen as the release of the US Nonfarm Payrolls approached. The release of the US Nonfarm Payrolls triggered a whipsaw in the US stock futures with the S&P 500 futures falling -0.41% immediately before bouncing back to flat and erasing the losses.
  • The US stock market opened lower from Thursday. US stocks then started to trade higher following the release of the UoM consumer survey. The much lower inflation expectations component boosted risk sentiment. Consequently, the S&P 500 closed +0.41% higher (high: +0.52%, low: -0.25%), the Dow Jones eked out a +0.36% gain (high: +0.50%, low: -0.15%) while the Nasdaq rose +0.39% (high: +0.49%, low: +0.53%).
  • The crypto market traded in a range today with both BTC and ETH ending slightly in the green.
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Headlines & Market Impact

China’s November consumer prices fall the fastest in 3 years

Notable Snippet: China’s consumer prices fell the fastest in three years in November, while factory-gate deflation deepened, suggesting heightening deflationary pressure as weak domestic demand casts doubts over the economic recovery.

The consumer price index (CPI) dropped 0.5% both from a year earlier and compared with October, data from the National Bureau of Statistics (NBS) showed on Saturday.

The falls were deeper than the median 0.1% declines, both year-on-year month-on-month, forecast in a Reuters poll. The year-on-year CPI decline was the steepest since November 2020.

Year-on-year core inflation, excluding food and fuel prices, was 0.6%, the same as October, pointing to a daunting task faced by Chinese authorities to revive demand as deflationary forces persist.

Although consumer prices in the world’s second-biggest economy have been teetering on the edge of deflation in recent months, China’s central bank Governor Pan Gongsheng said last week inflation was expected to be “going upwards.”

The producer price index (PPI) fell 3.0% year-on-year against a 2.6% drop in October, marking the 14th straight month of decline and the quickest since August. Economists had predicted a 2.8% fall in November.

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U.S. approves first gene-editing treatment, Casgevy, for sickle cell disease

Notable Snippet: The U.S. Food and Drug Administration on Friday approved the country’s first gene-editing treatment, Casgevy, for use in patients with sickle cell disease.

The approval comes about a decade after the discovery of CRISPR technology for editing human DNA, representing a significant scientific advancement. Yet reaching the tens of thousands of people who could benefit from the treatment could be challenging given the potential hurdles — including cost, at $2.2 million per patient — of administering the complex therapy.

Casgevy, co-developed by Vertex Pharmaceuticals and CRISPR Therapeutics, uses Nobel Prize-winning technology CRISPR to edit a person’s genes to treat disease. The treatment was approved by U.K. regulators last month.

Shares of Vertex fell 1% Friday, while shares of CRISPR fell 8%.

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Bitcoin Halving Is Poised to Unleash Darwinism on Miners

Notable Snippet: Darwinism could soon pummel some bitcoin (BTC) miners as the halving, a once-every-four-year event that cuts the reward for creating new BTC gets cut by 50%, unleashes a “survival of the fittest” battle in April.

To prepare for the disruptive event, larger companies are securing newer and more-efficient mining machines. But they might also consider gobbling up smaller miners as they figure out how to both survive and benefit from the halving.

Just ask Marathon Digital (MARA), the largest publicly traded miner by hashrate (industry jargon for the computing power it can direct toward running the Bitcoin network). The firm said this week that it’s got a hoard of money – more than $800 million of cash and bitcoin – and will seek to grow that to “capitalise on strategic opportunities, including industry consolidation” ahead of the halving.

Meanwhile, another large miner, Hut 8 (HUT), just completed its all-stock merger with a privately held US Bitcoin. CleanSpark (CLSK) has been collecting cheap assets since the start of the bear market and said it has almost $170 million shored up to “take advantage of opportunities the halving may present.” And Riot Platforms (RIOT), another institutional-grade miner, has just ordered 66,560 new mining machines for $290.5 million to stay ahead of the competition.

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord