On November 4, the U.S. market received the October jobs report – plus 261,000 new jobs. That’s above the forecast. But the unemployment rate rose from 3.5% to 3.7%. Average payrolls rose, +0.4%, also higher than forecast. How are bonds doing?
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10-year bond yields fell to 4.12% when the major indices hit session highs and rose to 4.17% when the stock market was at its low.
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The 2-year bond yield reached 4.65% when stocks hit their highs and rose to 4.70% when stocks fell.
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Eventually, the 10-year and 2-year bond yields settled at 4.16% and 4.67%, respectively.
The stock market began to rise as the U.S. dollar index collapsed. There were some major changes in the commodities market due to reports that China could relax its zero-coronavirus policy. WTI crude oil futures rose 5.2% to $92.64 a barrel and copper futures jumped 7.6% to $3.69 a pound.
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Energy: oil declines after rapid growth
Germany will spend 80 billion euros to help energy consumers amid soaring gas and electricity prices. The company, Uniper’s gas supplier to consumers, will suffer a huge loss of 40 billion euros because of the end of gas supplies from Russia and the need to buy much more expensive gas from alternative sources and deliver it at a loss under old contracts with consumers. The company will be nationalized and the losses will have to be covered from the budget.
What is Germany’s problem? Private consumers will get help and have a relatively quiet winter. However, the German industrial sector – especially the energy-intensive industries – will see a huge increase in energy and gas prices in the coming months. This will make many companies unprofitable – in particular the huge chemical industry sector. Dependence on cheap Russian gas has been too high here.
The market is waiting for two major events in the new week: the U.S. Congressional elections on November 8 and the U.S. inflation report on Thursday. Election: Republicans will probably win and gain control of the House and the Senate. This is likely to weaken Biden’s cabinet’s economic options and intensify the debate over taxes and the budget deficit.
Also, the CPI inflation report for the month is coming out soon with a high of +0.6% – if the data comes out as forecasted, it may trigger a new wave of selling in the stock market. We also recommend studying the MNI US Payrolls Preview. In the meantime, the general conclusion is that the market can start rising, but it needs support from the economic data.
