| Good morning. Strong US jobs growth bolsters the no-landing scenario, investors grow skeptical of China's equity rally, and Rio Tinto approaches a lithium company about a takeover. Here's what people are talking about. The best jobs growth in six months and a surprising drop in US unemployment sent Treasury yields surging Friday, leading investors to quickly revise the prospect the Federal Reserve will again deliver a half-point interest rate cut in the coming months. The jobs data has reignited the prospect of a so-called no landing scenario for the US economy, where interest rates may stay higher for longer. The world-beating rally in Chinese stocks is failing to convince many global fund managers and strategists. Invesco, JPMorgan Asset Management, HSBC Global Private Banking and Wealth, and Nomura are among those viewing the recent rebound with skepticism and waiting for Beijing to back up its stimulus pledges with real money. Some are also concerned many stocks are already reaching overvalued levels after a rally that has pushed the Hang Seng China Enterprises Index, which comprises Chinese stocks listed in Hong Kong, more than 30% higher over the past month. The world's second largest miner Rio Tinto confirmed it has made a non-binding takeover approach for $3.3 billion lithium miner Arcadium Lithium. Rio said in a statement there was no certainty that any transaction will be agreed to or will proceed. The miner said it wouldn't make a further comment unless it was appropriate, while Arcadium Lithium confirmed the approach in a separate statement. As it marks a year since the deadly Oct. 7 attacks by Hamas, Israel is locked into a multi-front war with no clear end, sending troops back to northern Gaza and keeping up intense aerial attacks and a limited ground maneuver in Lebanon. At the same time, Prime Minister Benjamin Netanyahu's government is weighing how to respond to Iran, which launched a salvo of almost 200 ballistic missiles at the Jewish state last week. Security forces in Israel and abroad are also on high alert for potential terror attacks from Iranian proxies on Monday's symbolic date. Oil futures posted their largest gain in more than a year last week. And the frenzy was even bigger in the options market. As traders fretted over the risk of a major price spike, the call skew on second-month West Texas Intermediate futures jumped to the highest since March 2022, when Russia's invasion of Ukraine sparked concerns that millions of barrels a day of oil from one of the world's top producers would suddenly disappear from the market. As expected, Friday's US session was volatile, with yields spiking across the curve. After a jobs report that surpassed all expectations, resiliency in the US labor market suggests yields can go even higher. And that won't deter stocks from continuing to rally on the prospect of a no-landing US economy. The September jobs report ended speculation that the Fed would cut by 50 bps in November or in the meetings ahead. Now quite suddenly, the question has become not whether the Fed is behind the curve in easing monetary policy, but instead whether it is stoking an unsustainable boom. In retrospect, the Fed's large cut in September may have been a policy error. The Fed could have cut a standard 25 bps in July and again last month, giving it greater optionality to hold the line as the economic data turned up decisively from July relative to expectations. Larry Summers is among prominent voices on Wall Street warning about the same. The latest data print is bad news for Treasury investors then. The increased prospect of "no landing" has also eliminated a floor for Treasury prices predicated on Fed rate cuts designed to remove policy restrictiveness by reducing real interest rates. Instead, we can now look forward to the upcoming CPI report with fear that the last mile in the Fed's anti-inflation journey is even more protracted than it had anticipated. Future rate pauses on poor inflation prints cannot be ruled out — putting yields beyond 4% for maturities beyond two years within reach. But this is all rocket fuel for stocks irrespective of what Treasuries do. The risk, for a market already trading at high price-earnings multiples, is a larger and longer boom followed by a more severe bust as the economy overheats. Ed Harrison writes the Everything Risk newsletter. Follow him on X at @edwardnh | 
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