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A Confusing Job Market...

Updated: Mar 12

BentinPartner Daily

January Factory orders declining by -3.6% (vs. -2.9% expected and a flat number reported previously) along with durable goods orders declining by -6.2% and the ISM Services employment component continuing to suggest declining employment, pointed towards a contracting US economy.


That said, on Wednesday and Thursday, Fed Chair Powell told the House Finance Committee and the Senate Finance Committee that he did not think the economy will fall in recession but that he still thought it would be appropriate to dial back monetary policy tightening sometimes in 2024. On Thursday jobless claims came in mostly unchanged but with a larger than expected January trade deficit (USD67.4bn from USD62.2bn last).


On Friday, the US job report showed a “confusing” picture (as usual) coming with a beat on the headline non-farm payrolls creation for February (275k vs. 200k expected) but with a sharp downwards revision of the previous job number creation (229k vs. 353k previously reported). The unemployment rate also came out at 3.9% (vs. 3.7% expected). However, this mixed bag for employment was accompanied by further signs of wage moderation with average hourly earnings rising gaining 0.1% MoM (vs. 0.2% expected).


While the ECB on Thursday also delivered lower inflation forecasts for this year (from 2.7% to 2.3%) and next (2%), pointing at a rate cut cycle starting in June, the major event last week (besides stocks ending a very long string of weekly gains) was a bout of high momentum dollar weakness accompanied by a mirror-like rally in the euro and EM currencies which posted further gains for the week despite two risk-off sessions and some noticeable faltering in the momentum trade on Friday. At the same time as yields shed -10bps on the week, Gold and bitcoin printed respective all-time highs with gold also making fresh all-time highs vs. CHF.


Something odd (and actually highly unusual) is happening at the same time as Gold prints all-time highs with flows into Gold ETFs continuing to show disinvestments (or rather inventory drawdowns).


This is happening in a context where China’s central bank added gold to its reserves for a 16th straight month in February, (+390,000oz last month) bringing China’s total “official” gold holdings to 2’257 tons, which likely drove the price action (and possibly the flows out of ETF’s as well). China’s central bank also bought 1,037 tons of gold last year, just shy of the all-time high of gold purchases from 2022, the World Gold Council reported.


So, what is happening with Gold Etf holdings?


Matthew Piepenburg from Von Greyerz Gold wrote an article (Modern “Leadership”: A Perfect Blend of Delusion, Dishonesty & Distraction) suggesting real physical gold being taken out of ETF’s by investors interested in getting hold of the real thing. He is also linking dollar weakness to lacklustre demand for recent Treasury auctions within the bigger picture of a rampant de-dollarization. His expectations for QE to return are likely widely shared.


When it comes to stocks, corrections are natural patterns even within a bull market and we may be on the eve of one such correction if the US economy, as seems likely, starts to weaken (bringing an end to the Q4 earnings strength  (which rose 8% vs. only 2% expected late last year) which took precedent over bond yields staying high in the face of a soaring supply, stubborn inflation and perhaps a slower than expected easing as Central Banks remain uncertain about their win over inflation. The BIS warned that “Services price inflation is likely to remain stubbornly strong this year and could cause central banks to delay interest rate cuts”


Momentum showed signs of fatigue last week but it happened before…and the equal weighed SP500 eked out a gain of 1% last week while the SP500 and Nasdaq both dropped.


Tesla shipments tumbled in China in February (60,365 China-made vehicles during the month, its lowest monthly reading since late 2022 while BYD, the Chinese automaker that overtook Tesla as the world’s top EV seller last quarter, saw its sales fall to 121,748 vehicles in February (from 201,493 in January).


At the same time, Apple’s iPhone sales in China fell 24% YoY in the first six weeks of 2024. In contrast, Huawei, saw unit sales rise by 64% in the period.


It was probably no coincidence for the WSJ to write “For American tech companies in China, the writing is on the wall. It’s also on paper, in Document 79. The 2022 Chinese government directive expands a drive that is muscling U.S. technology out of the country—an effort some refer to as ‘Delete A,’ for Delete America. Document 79 was so sensitive that high-ranking officials and executives were only shown the order and weren’t allowed to make copies, people familiar with the matter said. It requires state-owned companies in finance, energy and other sectors to replace foreign software in their IT systems by 2027.”


On the geopolitical side, French President Macron remained adamant about his call for not letting Russia draw red lines that could not be crossed but the most important news was probably the “retirement” of Victoria Nuland… (ZH) and her hawkish legacy.  "Her efforts have been indispensable to confronting Putin’s full-scale invasion of Ukraine, marshalling a global coalition to ensure his strategic failure, and helping Ukraine work toward the day when it will be able to stand strongly on its own feet – democratically, economically, and militarily.", Secretary Blinken said.


The US CPI is due out on Tuesday expected unchanged for the CPI YoY (at 3.1%) and slightly lower than last month for the core CPI YoY (at 3.7% from 3.9% for the previous reading).





Over the past week, the S&P500 dropped -0,2% (7,7% YTD) while the Nasdaq100 dropped -1,5% (7,2% YTD). The US small cap index gained 0,5% (3,0% YTD). AAPL sold off by -5,0% (-11,3%).


The Equally Weighed SP500 gained 1,0% (4,9% YTD), outperforming the S&P500 by 1,2%. The median SP500 YTD return closed the week at 2,9%.


Cboe Volatility Index rallied 12,4% (18,4% YTD) to 14,74.

The Eurostoxx50 gained 1,4% (10,0%), outperforming the S&P500 by 1,6%.

Diversified EM equities (VWO) gained 0,5% (1,6%), underperforming the S&P500 by 0,7%.


The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies dropped -0,9% (2,5%, Z-score -2,3) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 0,5% (-0,2%).


10Y US Treasuries rallied -10bps (20bps, Z-score -2,1) to 4,07%. 10Y Bunds dropped -15bps (24bps, Z-score -2,2) to 2,27%. 10Y Italian BTPs rallied -31bps (-12bps, Z-score -2,4) to 3,58%, outperforming Bunds by -16bps.

US High Yield (HY) Average Spread over Treasuries dropped -2bps (-9bps) to 3,14%. US Investment Grade Average OAS dropped -3bps (-2bps) to 1,03%.

In European credit markets, EUR 5Y Senior Financial Spread dropped -4bps (-7bps, Z-score -2,0) to 0,61%.


Gold rallied 4,6% (5,6%, Z-score 2,2) while Silver rallied 5,1% (2,2%). Major Gold Mines (GDX) rallied 8,5% (-4,4%, Z-score 2,0).


Goldman Sachs Commodity Index gained 0,3% (0,6%). WTI Crude sold off by -2,5% (8,9%).



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Marc Bentin serves as Economic Advisor to Blue Lotus Management,

a specialist multi-manager investment firm, which seeks to provide investors a compelling alternative to the traditional 60/40 equity and bond portfolio by targeting higher returns without amplifying equity risks.

BentinPartner GmbH is Advisor to the Phi Funds AIF, an umbrella Alternative Investment Fund registered and regulated in Lichtenstein, specializing in the management of Funds focused on physical precious metals.


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