 Okay, very good morning to you. It's Friday the 8th of October. Have you had a good week so far? I'm before I kick off for the normal proceedings just a reminder as I always do it's Friday And that means that there's going to be a new market maker Podcasts from amplify me. I'm going to chat to a head of trading peers after Payrolls so the episode is going to come out a little bit later today But don't forget to jump on Apple spotify Google podcasts, whichever platform you you use Search for it and subscribe and you'll get that episode as soon as it comes out It's basically where me and peers have a bit of a pub chat really trying to make it interesting talk about sort of major themes so today we're going to talk about Facebook and this is a situation they're facing from a Regulation point of view with a lot of the leaks that we saw in Wall Street Journal earlier this week as well as the Outage that they had for three and a half billion users We'll talk of things about things like Russia and gas and the energy crisis at the moment And then we'll talk about non-farm payrolls as well. So check that out otherwise, let's get straight to it and talk a little bit about the charts this morning and as you would imagine the things are relatively quiet and that's very reminiscent of what we normally see on the morning of a non-farm payrolls and So I'm going to jump straight in with payrolls really Let's just get straight to the action and talk about what we can expect from that Don't forget as well. I am going to be covering payrolls live Right here on the YouTube channel. So I'm going to go live at around 1 15 So don't forget to subscribe to the YouTube channel hit the bell icon And you'll get a notification as soon as I go live and what I'll do is I'll probably do a preview cover the live event and then do a bit of a post Mortem of the the outcome for 15 minutes or so then grab a couple of questions of you guys So love to have you on board But in terms of payrolls, what can we expect? So last time out as you can see here a real low ball surprise 235,000 and you know, I've seen that the labor market has been Overall over the last several months a little bit slower to return than perhaps a lot of people had initially been Anticipated inflation definitely is ticking the box at the moment the Fed needs to crack on with its tapering Process the process of reducing its monthly bond buying And that does look pretty assured at this point in time. And so And we are expecting a rebound in this number So this 235,000 is expected on the kind of median consensus on Wall Street banks to jump back up again The summer wave of COVID-19 cases has actually started to decline As you would have heard me mention before and when media is not talking COVID It's because case rates are going down and it's a lesser Narrative to spin from a sensational perspective that generally generates clicks So, you know COVID cases are going down when you're not really hearing a great deal about it at this time But if you actually look at the curve, it's heading in a good positive direction at the moment Which is lower in North America after that kind of summer outbreak that we had particularly in certain specific states So what does that mean? Well, that's going to fuel demand for more high contact services what I mean by that's things like dining out shopping and of course this then positions the Fed to be a little bit more proactive as they Have done in vocalizing their intentions to to commence tapering. So the headlines expected at 500k Always super important those to be aware of the range of estimates This gives you that remit then as to what might define the type of size of market reaction that you might see and at the low end The most pessimistic estimate is 250,000 the most optimistic is 700,000 and one of the things in a September This September employment report is the last one available before the highly kind of anticipated November early November meeting that the FMC will have which is where power most recently told reporters I quote it will take a reasonably good employment report close quote to meet the central bank's threshold for reducing its bond buying program I had a question already on Twitter someone asking me. What the hell does reasonably good mean? And it's a valid question, but therein is the art of central banking. You're not going to commit to a specific figure because that would be Almost doomed to fail. So reasonably good as far as most banks are concerned is probably anything That's above the bottom end of the street. So remember today's expected at 500,000 Most banks I've been reading are saying that anything at 250 or above Which again is the worst case scenario as far as analysts are looking for today would be enough to cement November So it would take a real Lowball downside negative surprise to really Make people question. Okay. Maybe it's not so issued that November's the kind of kickoff for tapering So I'm talking like a 100k 50k print something like that, which is definitely not what's expected so Yeah, the leisure and hospitality sectors as you would imagine I was just talking about the fact that covid's coming more under control There's going to be more kind of contact-based retail behavioral changes which should be more positive for that particular sector, of course So that's expected to bounce back after What we had seen Which was a fall of 42,000 in that area actually in the month of August. So things like Restaurants bars and things should see a meaningful uptick this time round or at least that's what's expected Also as well There should be a rebound in hiring in retailers as we go into the holiday season. Don't forget we've got things like Thanksgiving looming the build up to Christmas and you know many on the high street are expecting demand to be front Loaded given the supply constraints, which might mean that presents are very difficult to get hold of closer towards the time of Christmas And so therefore people purchasing up front and and so we could well see a rebound in hiring based on the fact of those seasonal patterns Government payrolls are also likely to have rebounded as well something which we looked at before schools fully reopened in person for learning However, one thing to be aware is on the auto manufacturing side specifically So when you get payrolls, there's the headline changing of our payrolls But then you get private payrolls manufacturing payrolls. You get a bit of a breakdown the manufacturing payroll number Probably would have slowed and that's likely being constrained by the chip supply shortage But we're still experiencing at the moment and this is having a big impact in the auto manufacturing sector And what we had in recent weeks was GM general motors and Ford who've actually announced production cuts at some of its plants in September as they managed that chip supply issue as well So there might be a little bit of a soft spot within the numbers Which otherwise should spring back a little bit from the weakness that was seen in the in the prior month The other thing of course, which probably won't materialize now But definitely as a consideration going into the fall and something which will support the feds kind of path towards tightening going forward is the fact that Federal government funded benefits expired in September and that affects around six million people So now now not receiving benefits. Does that incentivize them now to get back into the workforce? Is that another supportive factor as well? That means that even if the number comes out at 250 300 K Which is below expectations. Does the Fed push on anyway? Probably most likely that they will all things remaining equal, of course There's lots of things that can happen between now and Third of February. I think a third of November when their next meeting is so that's that's payrolls. How might the market react? Well It's a good question and I'll go through this really in a lot more detail when we do the live event at 115 for the release of 130 but equities have obviously had this really Powerful rebound over the course of the last two days We did of course have the situation on Capitol Hill With the latest legislation in the US where let me flip over the US Senate approved Of course legislation 50 to 48 to temporary temporarily raised the federal government's to 28.4 trillion debt limit to avoid the risk of default of course, which was looming in just about 10 days time All they've done here. I talked about this yesterday. They've kicked the can This is gonna re-emerge as a real issue towards the end of the year Probably late November because it's I think this takes us through to around the 3rd of December So what happens next the Senate is what happened last night So the Senate passed bill now goes to the House of Representatives They'll hold a vote on Tuesday all being well, which is anticipated It then goes to the president to be signed into law The other thing then and obviously this has been a positive factor that's helped that equity and sentiment recovery of this this week The other thing that is oil and oil has been on a tear of course. We've had a really Strong rebound actually over the course of the last day if I just bring that up We we saw energy prices overall kind of peter out gas Obviously got got hammered on the back of the the pledge from Vladimir Putin the Russian president to kind of open the taps a little bit To confront the issue in the gas market, but oil as well Which we looked at on the weekly before from a technical perspective had a nice Rejection initially up and around that 79 85 level looking at the weekly bars on the WTI continuation chart But we're right right back up there again today. So after that decline that we had midweek We've now come all the way racing back on on Thursday and actually oil is headed for and it's Seventh weekly game and that would be the longest run since December US energy department said yesterday in what's helped cultivate this about turn in markets Which I was talking about yesterday in the briefing was opening up the strategic petroleum reserve the SPR and Now the energy department is saying it has no plans at this time to tap the nation's oil reserves And so despite those comments from the energy secretary again They're kind of like words shot across the barrel to just to warn the market that they're ready to do so I don't think that they would at this point I was talking about yesterday analysts that say JP Morgan running them Financial models were basically suggesting that that all things being considered and all variables in the economy The market economically can handle prices well north of say a hundred and up to a hundred and thirty hundred fifty bucks So I find it hard to see that That the US would act on the SPR at this point in time at these levels I would anticipate it needs to be much higher for me. It's again politically It's strategic Biden needs to make these noises in order to show that he is being mindful to the pressures felt for the consumer and Then pivot the optics to put the pressure on the golf producers to take action to deflect the blame away from his administration So a lot of bark at the moment not a lot of bite I would expect that to remain the case which actually keeps things in a relatively bullish Mindset for the time being the other thing overnight that's happened actually that helps the oil narrative is in China We did have the case in services and composite PMI data And that actually both returned quite aggressively into expansionary territory as you can see here We had a really low ball number last time out and it's flickered back quite aggressively both new orders and employment bounce back into Expansionary territory and just like I was talking about in the general leisure and hospitality set to in the US With the more control of covid on cases declining. We've had similar case kind of in China They were experiencing as well a bit of an outbreak But what we have been seeing is The major outbreak in the eastern province of Jiangsu has been easing as well And that's just helped things a little bit on that front So new orders as I said employment bouncing back helping lift that service data in China However, I would say inflation is still at the forefront of a lot of people's minds on that Chinese data on the cost front Input prices rose for the 15th straight straight month And they were increased at a faster place pace on rising labor freight and raw materials costs So that inflation element definitely has still not gone away So it's kind of bullish for oil short-term energy But certainly keeps yields on the front foot and obviously the 10-year really has suffered this year Seize me this week as yields have continued to rise with this idea that inflation expectations are continuing to Move to the upside at the moment of all the products actually for non-farms Perhaps it's the 10-year where if we did get that worst case Unlikely scenario of a really bad report in payroll. So unemployment up job creation South of say a hundred then there's definitely room for the 10-year to kick back up here Given the downward move that we've seen through this kind of inflation trade That's been really dominating the price action throughout the the best part of this week certainly from an equity perspective if we did get that a low ball outcome then Does that make people a bit apprehensive about November? Well, you know what happens the worse it gets the more equities like it So I'd probably look for the NASDAQ to outperform actually in reaction on the back of that major mega cap tech obviously has suffered on this inflation recalibration in markets if you like and That would probably benefit most if we got a really bad payrolls report today So definitely I'd expect that to flip back up and reclaim and test up around the R1 in the futures Which would be up at yesterday's high levels If we get a decent number I don't think necessarily stocks sell off because remember that was a general play That would have been in force a few months ago And the reason for that is just that November is pretty baked in now And so the market I think has reclimatized to the fact that it is gonna happen But as I said, we're gonna go over payrolls in a lot more detail a bit later on. All right Well, just to wrap things up. What have we got in the calendar for this morning? Not a great deal at all really Just having a quick look if there's any other headlines since I've been going that have come out The only other thing is data earlier this morning German exports a little bit on the softer side minus 1.2% expectations were for plus 0.5 Otherwise, it's just a holding pattern really now until payrolls comes out and that of course is at 130 and then That's pretty much it speaker wise ESP's Panetta speaking at 2 and at a separate event talking about international trade and macroeconomics at 2 is Bank of England leaning dove Tin Ray row. So that is it guys Don't forget check out the podcast coming out Feel free if you if you're if you've got time to join me on YouTube at 1 15 I'll do the whole payrolls show live And then otherwise if I don't speak to you before then have a fantastic weekend. All right. Cheers guys