| Jobs, jobs, jobs; Tesla jobs and more oil. US employers may be entering a more careful phase with respect to hiring and pay decisions. Today's employment report is projected to show the economy added about 325,000 jobs in May -- still healthy, but the least in a year. Yesterday, a report by payrolls firm ADP showed US companies in May added the fewest jobs since the pandemic recovery began, suggesting employers struggled to recruit and retain workers. And right on cue, Tesla Inc. Chief Executive Elon Musk said the electric carmaker needs to cut staff by around 10%, noting he had a "super bad feeling" about the economy, according to an internal email seen by Reuters. The company employs around 99,290 people worldwide, so job losses approaching 10,000 people are possible. That comes after he urged everyone at the electric-vehicle manufacturer back to the office, saying in emails to staff that employees were "required to spend a minimum of 40 hours in the office per week." Tesla shares declined as much as 3.7% in New York premarket trading.  | OPEC+ agreed to open its oil taps faster in the summer months, a gesture of reconciliation to the US that nevertheless keeps Russia at the heart of the cartel. The modest supply boost -- amounting to just 0.4% of global demand over July and August -- may ease tight markets. But it leaves unanswered the question of whether the US can turn Saudi Arabia into an ally in its campaign to economically isolate Russia. U.S. stock index futures traded lower as of 5:03 a.m. after the Tesla news. Contracts on the Nasdaq 100, where Musk's company is among the largest index components, were 0.5% lower. S&P 500 futures dropped 0.3%. Europe's Stoxx 600 index edged higher, with consumer products and chemicals companies leading the modest advance. The Bloomberg dollar index steadied after overnight losses, while gold, oil and bitcoin traded lower. There's not much to look out for beyond the payrolls report, with final PMI readings due at 9:45 a.m. unlikely to move any needles. Even corporate earnings are pretty light. AIN Holdings reports, and Chungdamglobal and Aether Industries make their trading debuts. Markets in the UK are closed. One would imagine that Northern Hemisphere traders might slip off their desks unnoticed to enjoy an early (meteorological) summer weekend. Here's what caught our eye over the last 24 hours. Wednesday marked the official start of the Federal Reserve's balance sheet shrinkage, with a $15 billion batch of Treasury securities set to mature -- without reinvestment -- on June 15, she writes in The Weekly Fix. Given that this is the second time in modern history that the Fed has embarked on quantitative tightening, there are several enormous question marks. A big one is what the runoff will mean for the economy and fighting inflation (Fed Governor Christopher Waller: it's " highly uncertain"). Perhaps a harder question is what shrinking the balance sheet will mean for already-fraught trading conditions in Treasuries. Liquidity in the $22 trillion market has deteriorated over the past few months, with the Bloomberg US Government Securities Liquidity Index -- a gauge of deviations in yields from a fair-value model -- hovering near the highest levels since March 2020. Fed officials are seemingly well aware of the risk as the portfolio shrinks. The minutes from May's meeting showed that several policy makers "noted that the tightening of monetary policy could interact with vulnerabilities related to the liquidity of markets for Treasury securities." Layer in the fact that capital requirements have kept the big US banks from adding to market-making capacity in Treasuries over the past few years, and the outlook appears dicey. "Liquidity isn't great and financial conditions are already tightening before dealers even need to intermediate these Treasuries and mortgage-backed securities," said Deutsche Bank AG strategist Tim Wessel. That brings back nasty memories of late 2018. Fed chief Jerome Powell's remark that the balance-sheet unwind was running on "autopilot" sent the S&P 500 to the brink of a bear market -- a revolt that ultimately put an end to the central bank's hiking campaign. No such salvation is expected this time around, with Powell hell-bent on tightening financial conditions. The Fed's portfolio is projected to drop to $5.9 trillion by mid-2026, with the balance sheet shrinking by an average of $80 billion per month through 2024. Follow Bloomberg's Katie Greifeld on Twitter at @kgreifeld | 
No comments:
Post a Comment