🏪 Boom or Bust? Non Farm Payrolls Set to Shake Markets Today

Good Morning!

As we wrap up a week of market turbulence, the relative calm in dollar movements and US bonds might offer a brief respite – but don't get too comfortable. Friday's US employment data looms large, while Asian markets are showing mixed signals. Japan's Nikkei is nursing a 0.7% weekly decline, and Chinese markets are eerily flat after their recent 5% nosedive. China's latest inflation data shows persistent deflation, with Barclays slashing their 2025 CPI forecast to a mere 0.4%. Meanwhile, Japan's offering a glimmer of hope with multi-decade wage hikes potentially signaling economic shifts ahead.

In today’s email:

• FedWatch: All eyes on Non-Farm Payrolls data out today

• Bitcoin: Rallied back upto $94K but data dependent here

• PBoC: Halts bond purchases! 

• Gold: A look at optimal gold allocation

👇Join: Our exciting community subreddit to join the conversation:

THE BIG IDEA

Treasury yields signal a pivotal moment as markets brace for Friday's jobs report, with implications that could reshape the Fed's rate-cutting timeline

Here's what's cooking in the bond market – and why you should care about these seemingly boring numbers. The Treasury market's sending some seriously interesting signals, and we've got the inside scoop on what's driving this financial soap opera.

Remember when everyone thought the Fed would be slashing rates like a Black Friday sale? Well, that script's getting a major rewrite. Back in September, markets were betting on rates dropping to 2.8% by December 2025. Fast forward to now, and they're thinking more like 3.9% – that's a plot twist that's pushed 10-year Treasury yields up by a cool 100 basis points.

But here's where it gets spicy: Friday's jobs report needs to seriously underwhelm (we're talking sub-150K) to derail this yield train

The economy's been casually dropping 180K jobs monthly through 2024, settling into a cozy 150K pace in the last quarter. Markets are expecting 165K this time around, but honestly? That's not going to raise many eyebrows.

And let's talk about the elephant in the room – inflation's still hanging around like that party guest who doesn't get the hint. Sure, it's better behaved now, but at 3%, it's not exactly ready to call it a night. Add in the Trump factor (yes, markets are pricing that in), and we've got ourselves a recipe for potentially higher prices ahead.

The really juicy part? Some Fed officials are straight-up admitting that potential Trump policies influenced their rate projections. It's like watching a high-stakes poker game where everyone's cards are suddenly visible.

Bottom line: Unless Friday's numbers come in surprisingly weak, expect these yields to keep climbing. Welcome to 2025's first major market puzzle.

MARKETS AT A GLANCE

TOP NEWS

In a strategic pivot, China's central bank halts bond purchases amid global market pressures and concerns over the yuan's stability

The PBOC's just hit pause on treasury bond buying, citing a "shortage" – but let's read between the lines. With Chinese 30-year yields hitting rock bottom at 1.8% and the yuan sliding 5% since September, this looks more like a calculated move to defend the currency than a simple supply issue. The timing, right amid a global bond selloff, speaks volumes.

Rising bond yields are causing some companies to hit pause on debt sales, though market activity remains robust with $76 billion issued so far this year

The corporate bond scene's getting spicy with yields hitting 5.41% - levels we haven't seen since July. While some companies are playing it cool and postponing their debt sales, others aren't fazed. We've already seen $60 billion in investment-grade notes this week, mostly from utilities and financial firms. Talk about a mixed bag of market confidence.

The Magnificent Seven tech giants continue their market dominance, backed by extraordinary earnings growth that outpaces the broader market

Talk about a tech power play! While the Magnificent Seven (think Apple, Amazon, & co.) flexed a jaw-dropping 36% earnings growth in 2023, the rest of the S&P 500 actually shrank by 4%. Thanks largely to the AI boom, companies like Nvidia have seen profits skyrocket from $6B to $60B. Though growth's expected to cool, they're still set to outperform through to 2026.

CRYPTO

Bitcoin slides back to $91,000 amid market jitters over Friday's jobs report and shifting Fed rate expectations

Crypto's taking a breather, with Bitcoin dipping to $91,000 – a level we haven't seen since December. The culprit? Those pesky economic reports showing more muscle than expected, throwing cold water on rate cut hopes. While some traders are eyeing $85,000 as the next support, others point to strong buying interest on exchanges. Stay tuned for Friday's jobs data.

Silk Road’s $6.5B Bitcoin Stash Poses Minimal Market Risk if Sold OTC

The DOJ’s $6.5B Bitcoin haul from Silk Road won’t disrupt the market if sold via OTC desks, says CryptoQuant. While Bitcoin dropped 15% recently due to panic selling by short-term holders, analysts argue that BTC’s realized market cap growth outpaces the stash's potential impact. An OTC sale would preserve stability, whereas a spot market dump could trigger corrections. Long-term metrics suggest Bitcoin’s upward trend remains intact.

Standard Chartered Expands Crypto Custody to EU with Luxembourg License

Standard Chartered has secured a Luxembourg license to offer crypto custody services, leveraging the region as its gateway to the EU under MiCA regulations. Laurent Marochini, ex-Société Générale innovation lead, will head the new operations. The move complements the bank’s September UAE launch and marks a major step in integrating secure digital asset services with traditional finance.

Crypto Entering ‘Banana Singularity’ Phase, Says Raoul Pal

If you're looking for hopium: Real Vision CEO Raoul Pal predicts the crypto market is heading into the “Banana Singularity,” where altcoins experience a massive rally. This follows the consolidation phase after Bitcoin's breakout in November. Pal envisions three stages: current consolidation, the altcoin surge, and a concentration phase where core winners make new highs. Despite recent corrections, crypto market cap remains up 90% year-on-year.

GOLD

Gold remains a top choice for diversification and risk hedging against inflation, market volatility, and geopolitical chaos, while boosting portfolio performance

Gold isn't just a shiny bauble—it’s the portfolio MVP. Investors love it for its low correlation with equities and bonds, offering a hedge against inflation, market turmoil, and geopolitical risks. WisdomTree research suggests adding up to 13% gold to portfolios optimizes returns and mitigates losses. With economic uncertainty brewing, gold's allure is as timeless as ever.

DAILY ECONOMIC CALENDAR (ET)

MEME OF THE DAY