5 things to start your day: Europe

Good morning. Investors await US payrolls data to gauge the Federal Reserve's next move, heightened tensions in the Middle East keep traders

View in browser

Good morning. Investors await US payrolls data to gauge the Federal Reserve's next move, heightened tensions in the Middle East keep traders on edge, and skeptics about the recent China rally emerge. Here's what people are talking about.

Jobs day

The latest US payrolls report is set to give investors clues on the pace of the Fed's monetary policy easing cycle. Economists anticipate hiring picked up slightly in September while the unemployment rate held steady at 4.2%, an outcome that would assuage any lingering concerns that labor demand is deteriorating. Softer hiring and a rise in the jobless rate earlier this year were major drivers behind the Fed's decision to start its easing campaign with a large half-a-point cut in  rates last month. Chair Jerome Powell this week reiterated that he wouldn't want to see further weakening in the labor market. Chicago Fed President Austan Goolsbee reiterated interest rates need to come down over the next year by "a lot."

Mideast tensions

A rally in oil stalled after the commodity saw its biggest one-day jump in almost a year. Still, crude futures are set for a weekly advance amid concerns Israel may decide to strike Iranian crude facilities in retaliation for a missile barrage earlier this week. Traders are worried that, should Israel strike critical Iranian assets, the Islamic Republic will lash out and escalate the conflict — and potentially disrupting global energy shipments. Israel said it bombed more than a dozen Hezbollah targets in Beirut on Thursday. Gold is edging higher on Friday while a gauge of the US dollar is little changed.

Back to China

Billions of dollars have exited China's largest money market exchange-traded funds just as billions more flowed into ETFs tracking equities. These moves signal Beijing has finally drawn skeptical investors back to the country's struggling stock market. Investors across the globe are rushing to scoop up Chinese stocks as Beijing's stimulus blitz sets off an epic rally, though some see the upturn as fleeting. Nomura warns investors should brace for the biggest stock rally in China in 16 years to turn to bust, with the economy on a much weaker footing than before the pandemic.

$30 trillion market

Blackstone expects the private credit market to balloon to $30 trillion in size, fueled by lending for infrastructure projects and greater participation from pension funds. "The opportunity set to finance the real economy, whether that's credit cards, whether that's equipment, whether that's data centers, aircraft — that is roughly a $30 trillion opportunity," said Rob Horn, global head of infrastructure and asset-based credit at the recently-formed Blackstone Credit and Insurance, or BXCI, unit. Private debt has expanded rapidly over the last decade to about $1.7 trillion, mostly by funding private equity.

French taxes

French Prime Minister Michel Barnier said planned tax increases to get France's budget deficit under control will hit about 300 of the country's biggest companies. The increase will be temporary, for one or two years, and will be limited to companies with €1 billion ($1.1 billion) of annual revenue or more, he said on France 2 television. Barnier's comments provided detail about the broad strokes of a plan the government laid out this week for about €60 billion of spending cuts and tax hikes. The measures will be needed next year to rein in a widening budget deficit and bolster investor confidence in the country. The 2025 budget will be submitted to cabinet and parliament on Oct. 10 for debate and possible amendments.

Coming up

Industrial production figures from France and Spain are due. As for central bank speakers, the ECB's Guindos, Kazaks, Muller, Escriva and Villeroy appear. National Bank of Poland publishes minutes of September rate meeting.

What we've been reading

This is what's caught our eye over the past 24 hours. Goldman Sachs prodigy struggles to crack hedge fund elite Carmakers dangle £2 billion in EV discounts to boost UK sales HSBC scraps some internal events, restricts travel to curb costs Zuckerberg passes Bezos to become world's second-richest person OpenAI's Altman concentrates power on path to massive funding Cisco nears investment in CoreWeave at $23 billion valuation US dockworkers agree to suspend strike until Jan. 15

And finally, here's what Mark is interested in this morning:

The JPMorgan Global Services PMI gauge is still running in the expansion zone, while more G-10 central bank interest rate cuts are on the horizon — a setup which will stoke inflationary fears and steepen yield curves. Although the index dipped slightly in September, it was the 20th consecutive month of expansion. The Federal Reserve, the European Central Bank and now the Bank of England — after dovish comments from Governor Bailey — are all set for more easing in the weeks ahead. Moreover, the Bank of Japan appears to be pushing a rate hike into next year while the Reserve Bank of New Zealand is seen cutting by 50 basis points next week. The picture from the JPMorgan Global Manufacturing PMI Index is more cautious with the latest prints coming in below the 50 level, but those readings were taken before the full impact of China's recent multi-pronged stimulus measures would have been fully digested. The country has room to ramp up fiscal support for the economy by issuing as much as 10 trillion yuan in special debt, according to a leading economist in China. All of which points to the risk of higher inflation expectations returning to haunt bond traders in the months ahead, which will tilt yield curves upward. Mark Cranfield is a macro strategist for Bloomberg's Markets Live team, based in Singapore.

Follow Us

Stay updated by saving our new email address Our email address is changing, which means you'll be receiving this newsletter from noreply@news.bloomberg.com. Here's how to update your contacts to ensure you continue receiving it: Gmail: Open an email from Bloomberg, click the three dots in the top right corner, select "Mark as important." Outlook: Right-click on Bloomberg's email address and select "Add to Outlook Contacts." Apple Mail: Open the email, click on Bloomberg's email address, and select "Add to Contacts" or "Add to VIPs." Yahoo Mail: Open an email from Bloomberg, hover over the email address, click "Add to Contacts."

Like getting this newsletter? Subscribe to Bloomberg.com for unlimited access to trusted, data-driven journalism and subscriber-only insights. Want to sponsor this newsletter? Get in touch here. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Europe Edition newsletter. If a friend forwarded you this message, sign up here to get it in your inbox. Unsubscribe Bloomberg.com Contact Us Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022