Crypto gains as a new Bitcoin-linked ETF sets to begin trading

Bond yields and the dollar are falling, and that’s giving a bit of a lift to global stocks. And even more of a lift to commodities. U.S. Futures are gaining, looking to add to yesterday’s gains. Asia and Europe, meanwhile, are bouncing back after a slow Monday.

Crypto and exchange-traded funds, two giants of the markets, will join forces today as a new Bitcoin ETF begins trading. Speaking of BTC… it’s gaining, putting it roughly 2% below its all-time high.

And speaking of market forces… in today’s essay, I look at a fascinating new report about the power of quitters, those nomads of the labor market who are driving bosses crazy. They may be coming for your stock portfolio, too.

Let’s spin the globe and see what’s moving markets.

Markets update

Asia

• The Asian markets are rebounding from Monday’s losses with the Hang Seng up 1.2% in afternoon trading.
• The super volatile HS Tech index was propelling the Asian rally today. One of the leaders is Alibaba, which debuted a new 5-nanometer server chip on Tuesday. Alibaba shares in Hong Kong were up 1% in late afternoon.
• Copper bugs, this one’s for you… You’d have to go back to the Clinton years to experience the kind of one-day price-rise we saw yesterday in copper future prices. Copper is a bellwether for global growth, but this kind of parabolic spikes tell us demand and supply have broken down.

Europe

• The European bourses were bouncing back, with the Stoxx Europe 600 up nearly 0.2% two hours into the trading session. Basic resources was the big winner out of the gate, helped by soaring commodities prices.
• There’s a bit of alarm over a recent spike in U.K. Covid cases, and something called the Delta Plus variant. Here’s what you need to know about this variant of interest.
• Boris Johnson believes the upcoming COP26 climate talks in Glasgow with be “tough.” He called out the world’s biggest economies to commit to “hard pledges” to slash emissions.

U.S.

• U.S. Futures point to a decent open. On Monday, tech stocks were the breakout stars, and are holding those gains as bond yields tick lower.
• Investors cheered Apple’s big reveal of a newly designed MacBook Pro (powered by its own chips) and AirPods, sending shares up 1.2%… In other FAANG news, Netflix reports today. Here’s what Wall Street will be looking for there.
• Shares in Moderna and Johnson & Johnson were up—Pfizer was down—in pre-market trading this morning as the FDA grows close to approving mixing-and-matching for COVID booster shots.

Elsewhere

• Gold is up, trading around $1,780/ounce.
• The dollar is down.
• Crude is gaining again with Brent trading above $84/barrel.
• Crypto is steady. Bitcoin trades around $62,000. There’s plenty of excitement as the first BTC ETFbegins trading today.

***

Are quitters the new winners?

You’re not imagining things. Employers are hanging a lot of “Help Wanted” signs in the proverbial shop-window these days. The gap between job vacancies and new hirings is at such a high-water mark that economists fret it will fundamentally mess with productivity of the world’s most advanced economies.

Where have all the willing and able workers gone? Are they exiting the labor market to trade crypto and meme stocks? Are they hoping to strike it rich as a TikTok influencer?

Whatever the answer, Morgan Stanley’s Lisa Shalett, does not believe this labor market phenomenon is—to borrow a favorite modifier of Fed chief Jerome Powell—a transient issue. Just look at the “quit rate,” the bank’s chief investment officer says, which hit an all-time high in April, and has climbed month-on-month since then.

The chart above, according to Shalett, “suggests a turnover rate of nearly 3% in the U.S. Workforce.” Three percent attrition rate may not sound like a lot, but it’s a big headache for already talent-starved CEOs. It’s not hard to imagine that within that 3% cohort you’d find many of the best and brightest from within an organization ready to jump ship (if they already haven’t).

With so many workers on the move, this movement will undoubtedly push up wages. “This suggests that odds of more persistent inflation are rising,” Shalett writes, “a key factor for corporate profit forecasts and for Fed policymakers.”

If wage expectations spike, that will push up inflation even further—not a great prospect for corporate earnings. Conversely, if wages don’t rise quite high enough, that could sock consumption. This is textbook economics.

Another question hanging over the markets: what would happen if personal income were to grow too fast? Shalett responds, it would put the Fed “behind the curve,” and, consequently, the central bank would have to jack up rates more quickly to attack inflation. That would be yet more bad news for your portfolio.

How do you play this then?

Shalett writes:

Watch wage growth versus the CPI, as well as employment cost indexes. They will become increasingly important to the earnings outlook. Consider balancing stock selection between businesses that are capital intensive versus those that are labor intensive. Overweight financials and energy against consumer staples and health care. Consumer discretionary and tech are underweights.

***

Bernhard Warner
@BernhardWarner
[email protected]

As always, you can write to [email protected] or reply to this email with suggestions and feedback.

Today's reads

Wall Street watches for a ‘Squid Game’ effect in Netflix’s upcoming earnings—Coins2Day

Just how massive Amazon has grown during the pandemic, in 8 charts—Coins2Day

Mortgage rates may spike 30% next year, according to a new forecast—Coins2Day

‘Crazy’ Bets on $200 Oil Invade the Options Market—Wall Street Journal

Market candy

8.8%

That's how much the Netflix share price has appreciated since the streaming giant released Squid Game on September 17. Whether or not to watch Series 1 has become a regular debate at casa Warner. I have little interest in the survival thriller. My kids keeping talking about it because it's the big buzz with classmates.