JOB GROWTH DIP

In August, private sector job growth slowed down significantly, with only 99,000 jobs added – the lowest growth rate since January 2021. This data from ADP indicates a downturn in the labor market, as hiring activity dipped below expectations. Various sectors experienced job losses, including professional services and manufacturing, while industries like education, health services, construction, and finance saw modest gains. Moreover, despite a rise in wages, the pace of growth has eased compared to previous months, while concerns over layoffs have been raised, with reports showing a decrease in available job openings. These trends are prompting speculation that the Federal Reserve may reduce interest rates in response to the labor market’s weakened conditions. Additionally, upcoming reports from the Bureau of Labor Statistics due tomorrow morning will provide more insight into the health of the job market.

BELOW EXPECTATIONS

In the week ending August 31, newly filed unemployment insurance claims in the United States totaled 227,000, as reported by the Department of Labor. This figure fell below the initial consensus of 231,000 and was lower than the previous week’s 232,000, which was revised from 231,000. The publication also disclosed that the seasonally-adjusted insured unemployment rate was 1.2% with a four-week moving average of 230,000, showing a decrease of 1,750 from the previous week’s average. Additionally, Continuing Claims declined by 22,000 to 1.838 million in the week ending August 24. These numbers provide insight into the ongoing trends in joblessness and the impact of economic conditions on the labor market, reflecting potential shifts in employment dynamics and influencing future policy decisions aimed at supporting those affected by unemployment.

ETF MILESTONE

BlackRock’s iShares global fixed income ETF business has surpassed the $1 trillion mark, demonstrating a significant milestone in the global bond ETF market. Steve Laipply, BlackRock’s global co-head of fixed income ETFs, suggests that this achievement marks the beginning of a broader trend towards increased investments in bond ETFs. Prior to the Covid pandemic, investors searching for higher yields had to compromise on credit quality and liquidity. However, the Federal Reserve’s interest rate hikes amidst low bond yields have encouraged investors to reexamine the fixed income landscape. With the Fed potentially transitioning towards a rate-cutting cycle, longer-term yields could experience a surge in the future. This year, the iShares Core U.S. Aggregate Bond ETF (AGG) and iShares 20+ Year Treasury Bond ETF (TLT) have seen significant inflows, reflecting a shift in investor sentiment towards bond ETFs as a stable and attractive investment option. Additionally, BlackRock forecasts that bond ETF assets could reach $6 trillion by 2030, highlighting the growing popularity and structural trends favoring fixed income ETFs as a modernizing force in the bond market.

SIGNIFICANT OUTFLOWS

Bitcoin and Ethereum exchange-traded funds (ETFs) are experiencing a period of outflows in the current market volatility. Over the last few days, significant withdrawals totaling $287.8 million were observed in Bitcoin spot ETFs, with Grayscale Bitcoin Trust (GBTC) and Fidelity’s Bitcoin ETF (FBTC) seeing notable outflows. Similarly, Ethereum spot ETFs recorded a net outflow of $47.4 million, with Grayscale’s Ethereum ETF (ETHE) leading the way. The broader cryptocurrency market faced selling pressure, with Bitcoin and Ethereum prices dropping by 4.1% and 4.3%, respectively, following a downturn in global stock markets. Despite some recovery, analysts warn of ongoing market uncertainty, citing short-term oversold conditions that could lead to price stabilization in the near future. However, concerns persist about potential further declines, particularly if Bitcoin breaches below $56,500, indicating a bearish outlook. Analysts also point to an intermediate-term correction for Bitcoin, with secondary support identified at $49,300 as a key level to watch.

CHINESE STOCKS DITCHED

JPMorgan Chase & Co. has decided to withdraw their buy recommendation for Chinese stocks due to increased market volatility surrounding the upcoming U.S. elections, as well as ongoing challenges in China’s economic growth and policy support. This decision comes as part of a broader trend in which global firms, including UBS Global Wealth Management and Nomura Holdings Inc., are downgrading their expectations for the Chinese stock market. Concerns about a potential new trade war and China’s sluggish economic recovery efforts are prompting investors and analysts to exclude China from their investment strategies in favor of other emerging markets like India and Mexico. As a result, new emerging market equity funds that exclude China are gaining popularity among investors seeking higher returns. JPMorgan has adjusted its target levels for key China indexes, and predicts a weak market performance in the coming months amid uncertainties surrounding the U.S. presidential election and the Federal Reserve’s rate decisions. Additionally, they have raised the cash level in their China equity model portfolio to better navigate the evolving market landscape.