Bitcoin Rises as Weak Jobs Data Boost Rate-Cut Bets — Market Talk
1001 ET - Bitcoin rises to its highest in almost two-week after weaker-than-expected U.S. private payrolls data boosted expectations for further interest-rate cuts. The ADP said payrolls fell 32,000 in September. Economists in a WSJ survey expected a 45,000 increase. The market is now fully pricing in another rate cut at the Federal Reserve's October 29 meeting, LSEG data show. Rate cuts tend to support risky assets, including cryptocurrencies. Meanwhile, bitcoin could benefit from seasonable factors, LMAX Group's Joel Kruger says in a note. "Bitcoin has delivered positive October returns in 10 of the past 12 years, and the fourth quarter remains by far the strongest seasonal stretch for the asset class." Bitcoin rises to a high of $116,910, according to LSEG. ([email protected])1001 ET - The ADP report has a spotty correlation with the more comprehensive nonfarm payrolls. Still, it may end up being the Fed's proxy for the official data, Capital.com's Daniela Hathorn says. ADP reported a 32,000 job loss in September. Economists surveyed by WSJ forecast nonfarm payrolls at 51,000, up from August's 22,000, but the data scheduled for Friday is expected to be delayed until lawmakers agree on refunding the government. "The situation is less than ideal as markets want more than ever more clarity," Hathorn says. "If [Fed officials] take the ADP at face value, the outlook isn't great, and the FOMC could be more dovish than currently priced in," she says. ([email protected]; @ptrevisani)0959 ET - Bond yields offer durable opportunities while cash rates are poised to decline, Pimco's Tiffany Wilding and Andrew Balls say in a note. The currently available starting bond yields are attractive and can support strong returns and income potential in the years ahead, economist Wilding and Balls, CIO of global fixed income say. This income potential could play out across a variety of economic scenarios, they say. "With rates on cash-like investments likely to decline alongside central bank policy rates, we expect bonds to outperform." Pimco favors short and intermediate bond maturities. ([email protected])0957 ET - The U.S. ag market may be missing vital USDA reports until further notice due to the government shutdown, according to postings on various USDA websites. A notice on the website that reports weekly U.S. grain export sales says it won't be updated with current information due to the lapse in federal funding. Spokespeople for USDA departments including the Foreign Agricultural Service, National Agricultural Statistics Service, Food Safety and Inspection Service, and Farm Service Agency, among others, did not immediately return requests for comment. According to an agency document, "most USDA employees will be placed on furlough" in the event of a government shutdown, unless otherwise designated as "excepted" or "exempt." ([email protected])0940 ET - In the absence of new data, the Fed is likely to keep cutting interest rates by 25 basis point this month and in December, Citibank economists write. The sequence of cuts has been indicated in the Fed's latest dot plot. The government shutdown raises the risk that relevant indicators, including labor and inflation gauges, could be missing by the time the FOMC meets to decide on rates on October 29. "Investors may take their cues from less reliable private sector data like ADP employment," the Citi economists say. ([email protected]; @ptrevisani)0927 ET - Signs of fresh weakening in the American labor market could force the Federal Reserve into cutting interest rates this month, Capital Economics' Stephen Brown writes in a note. More than 30,000 private-sector jobs were lost in the U.S. last month, payroll-processor ADP said in a monthly report Wednesday. ADP's report could well carry more weight than usual, since a federal government shutdown imperils the scheduled release of official jobs data. That would leave the Fed's policy committee with scant information when it meets at the end of October, Brown says. "If that is the case then ... the FOMC could be more likely to cut again this month," he says. ([email protected]; @joshualeokirby)0912 ET - New signs of weakening U.S. labor markets spur bets on faster interest rate cutting by the Fed. Markets were already pricing in a 25-basis-point cut this month, before ADP said private employers shed 32,000 jobs in September. Forecasters expected a positive figure. The indicator pushed down Treasury yields and the dollar. On the CME's FedWatch tool, odds of a 50-bp trim popped up at 3%. The ADP data gains relevance as the BLS's September nonfarm payrolls report is expected to be delayed due to the government shutdown, potentially forcing the Fed to lean on alternative gauges to assess the state of employment in its October 29 rate decision. ([email protected]; @ptrevisani)0854 ET - Gold prices hold above the $3,900 mark after the latest U.S. data signalled a weakening labor market, boosting expectations for further interest-rate cuts later this year. In afternoon trade, futures are up 0.8% at $3,902.30 a troy ounce after reaching $3,922.70 earlier in the session. U.S. private employers shed 32,000 jobs last month, payrolls processing firm ADP reported, against an expected increase of 50,000. "Historical patterns show gold soaring on significant labor market disappointments," says Nadir Belbarka, analyst at brokerage XMArabia. Meanwhile, "a weaker USD further boosts gold's affordability for global buyers, driving robust demand." The U.S. dollar index--which measures the greenback against a basket of other currencies-- trades 0.2% lower to 97.54, pressured by uncertainties over the impact of the federal government shutdown. ([email protected])0854 ET - The dismal ADP employment report "provides very little information of value," Pantheon's Oliver Allen writes. ADP reported a 32,000 decline in private payrolls in September. Economists surveyed by WSJ expected a 45,000 increase. The firm says it has recalibrated the data set last month. Allen says the report has a poor long-term forecasting record. He says "more reliable surveys generally point to growth in private payrolls slowing only a bit further in September, and remaining positive." The BLS September jobs report expected Friday will likely be delayed by the government shutdown, but when released Allen expects a 50,000 payroll increase. ([email protected]; @ptrevisani)0851 ET - The dollar is at risk of further losses if the U.S. government shutdown becomes prolonged and President Trump follows through on his threat of massing firings of federal workers, MUFG Bank's Derek Halpenny says in a note. This is because the market would likely price in a greater prospect of the Federal Reserve cutting interest rates further in October and December, he says. Trump has been more aggressive in implementing his policies in his second term and might not be willing to compromise as he did in the last shutdown in 2018, he says. If he fires workers, this would create a bigger drag on growth. The DXY dollar index falls 0.2% to a one-week low of 97.462. ([email protected])0847 ET - Yields on U.K. government bonds fall, tracking their U.S. peers, following weak U.S. ADP private jobs data which could increase prospects of more interest-rate cuts by the Federal Reserve. The ADP data for September showed private-sector jobs fell by 32,000, significantly weaker than the consensus forecast by economists in a WSJ poll of 45,000 additional jobs. Markets price in a high chance of two more rate cuts in the U.S. by the end of 2025, LSEG data show. Ten-year gilt yields fall 2 basis points on the day following the data release, last trading at 4.686%, Tradeweb data show. Ten-year Treasury yields fall 5 basis points to 4.100%. ([email protected])0844 ET - Pay growth was steady in September among U.S. private sector workers, despite the reduction of 32,000 jobs, ADP reports. The firm says year-over-year pay growth for job-stayers was little changed at 4.5%. Pay gains for people changing jobs slowed to 6.6% from 7.1%, led by leisure and hospitality and financial activities, the firm says, adding that job creation continued to lose momentum across most sectors. ([email protected]; @ptrevisani)