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Payrolls, China COVID Pivot, Tech Layoffs - What's Moving Markets

Published 04/11/2022, 11:30
Updated 04/11/2022, 11:30
© Reuters.

By Geoffrey Smith 

Investing.com -- The U.S. releases its official labor market report for October, which is expected to show that hiring slowed again last month as the economy cooled. That's a picture that's being corroborated in real time with the announcement of layoffs and hiring freezes at some high-profile technology companies. Chinese stocks roared to their best week in 11 years as hopes grew for an end to the Zero-COVID policy. That's dragged up commodity prices and mining stocks in its wake. Elon Musk is set to swing the axe at Twitter, but a chunky list of big-name advertisers has already beaten him to the punch. Here's what you need to know in financial markets on Friday, 4th November.

1. Jobs report set to show hiring slowdown

It's payrolls day. The numbers may not have quite the impact they usually have, given that they come only two days after the Federal Reserve's latest decisions and guidance, which made clear that it will take something remarkable to stop the central bank from raising interest rates further into next year.

The report may not even have the same psychological impact as the reports on Thursday that tech giants such as Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) – previously hoped to be immune to the broader slowdown - are pausing hiring, at least in some parts of their business.

Analysts expect nonfarm payrolls to have risen 200,000, which is less than ADP’s estimate of 239,000 private-sector job gains in the month. Average hourly earnings growth is also expected to have slowed to a rate of 4.7% from 5.0% in September, not least because job growth in recent months appears to have been strongest in (typically lower-paying) leisure and hospitality jobs. The jobless rate is seen ticking up to 3.6% from 3.5% last month.

2. The China pivot story is back on

The jobs numbers may struggle to revive the Fed pivot story, but the Zero-COVID pivot story in China is alive and well after two seemingly important pieces of news overnight.

Bloomberg reported that Chinese authorities are looking at scrapping a system that penalizes airlines for bringing COVID-carriers into the country, while one of the country's top epidemiologists told an investment conference that he expects substantial changes to the policy within five or six months.

Hong Kong's Hang Seng leaped another 5.4% on the news, rounding off its best week in 11 years on hopes that a policy that has been a big drag on growth this year will finally be scrapped (even if the country's health regulators aren't willing to say so in public yet).

Base metals and mining stocks also soared.

3. U.S. stocks lifted by Chinese news; PayPal's outlook disappoints

U.S. stock markets are set to open higher, helped by the prospect of a pivot in China. The news of layoffs at Lyft (NASDAQ:LYFT) and Stripe, along with a partial hiring freeze at Amazon, has also emboldened expectations of a weak payrolls report that ought, ultimately, feed through into a more gentle Fed policy.

By 06:25 ET (10:25 GMT), Dow Jones futures were up 170 points or 0.5%, while S&P 500 futures were up 0.7%, and Nasdaq 100 futures were up 0.8%. The three major cash indices are nonetheless all on course for a weekly loss, thanks to the selloff that followed the Fed's hawkish press conference on Wednesday.

Stocks likely to be in focus later include Starbucks (NASDAQ:SBUX) and PayPal (NASDAQ:PYPL), both of which beat expectations with their quarterly numbers late on Thursday. Although in PayPal's case, it was a disappointingly weak revenue forecast that grabbed the eye. Duke (NYSE:DUK), AES (NYSE:AES), and Dominion Energy (NYSE:D) are all due to report early, as are Cardinal Health (NYSE:CAH) and troubled FuboTV (NYSE:FUBO).

4. Musk set to announce Twitter job cuts as advertisers pull back

The scale of Elon Musk's axe-swinging at Twitter (NYSE:TWTR) will become clear, amid swirling rumors that the Tesla (NASDAQ:TSLA) CEO wants to lay off as much as half of the company's 7,500 staff.

"In an effort to place Twitter on a healthy path, we will go through the difficult process of reducing our global workforce on Friday," Musk wrote in an email to staff on Thursday.

The company certainly seems to be facing straitened circumstances going forward, as big-name advertisers including L'Oreal (EPA:OREP), Mondelez (NASDAQ:MDLZ), Volkswagen (ETR:VOWG_p), Audi and General Mills (NYSE:GIS) have all suspended placements with Twitter this week on concerns at Musk's content policy. The company's Chief Commercial Officer Sarah Personette, who was responsible for contacts with advertisers, has also quit.

5. Oil lifted by Chinese news; rig count, CFTC numbers due later

Crude oil joined the rally sparked by the news out of China, surging overnight to its highest in nearly four weeks.

By 6:35 ET, U.S. crude futures were up 3.2% at $91.03 a barrel, while Brent was up 2.8% at $97.36 a barrel.

The rise in prices is a reflection of how poorly equipped the world oil market is to deal with a meaningful rise in Chinese demand, given the lack of spare capacity. Baker Hughes' rig count and the CFTC's positioning data later may cast further light on that.

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