Bloomberg - Evening Briefing - The big report

“Tomorrow’s jobs report may be the most important one of the year,” says Tom Essaye, founder of The Sevens Report newsletter. On Thursday, investors backed away from the worst of the week’s losses as they await Friday’s data. With the S&P 500 already down roughly 8% from July highs, more strong numbers from a historically robust US jobs market could push yields back up and stocks down. If the report turns out to be really good news for workers and the yield on the US 10-year bond moves close to 5%, “we could easily see the S&P 500 fall through the 200-day moving average,” the former Merrill Lynch trader wrote, “and at that point we could see an acceleration of the declines in stocks.” Here’s your markets wrap. —David E. Rovella

William Eigen is sticking to the strategy that’s helped him thrive amid the worst bond rout in history: keeping most of his $8.8 billion JPMorgan Strategic Income Opportunities Fund in cash. As of the end of August, 63% of the portfolio was in cash-like instruments, mainly commercial paper. The rest, he says, is primarily in short-dated, floating-rate investment-grade debt, a bet that will pay off if yields climb, which they have been doing relentlessly for months.

How to stop the bond spiral? That’s easy—pray for a stock market drop. Global bonds are doomed to keep falling unless a sustained slump in equities revives the appeal of fixed-income assets, says Barclays. The rout in Treasuries has sent shockwaves through the global bond market in recent months as investors prepare for a long haul of high borrowing costs. “There is no magic level of yields that, when reached, will automatically draw in enough buyers to spark a sustained bond rally,” analysts led by Ajay Rajadhyaksha wrote in a note. “In the short term, we can think of one scenario where bonds rally materially. If risk assets fall sharply in the coming weeks.”

Federal Reserve Bank of Richmond President Thomas Barkin said surging Treasury yields reflect strong economic data as well as heavy supply, adding that it’s a return to a more normal rate seen in prior years. “There’s a lot of fiscal issuance out there,” Barkin said. “That’s creating a lot of supply. And the data have come in a lot stronger lately.” San Francisco Fed President Mary Daly said that if financial conditions remain tight, the central bank may not need to do as much to tame inflation. 

Vladimir Putin’s forces killed more than 50 Ukrainian civilians, including children, when Russia bombed a village cafe and store in Hroza, near Kharkiv in eastern Ukraine, according to Kyiv authorities. The Associated Press reported body parts were strewn across a nearby children’s playground. Some 60 people had gathered when the Russian bomb struck, the AP said. They were reportedly attending a wake.

Emergency workers search for victims of a Russian rocket attack in Hroza near Kharkiv, Ukraine, on Thursday. Photographer: Ukrainian Presidential Press Office/AP

Egypt will “bleed” precious reserves unless it devalues its currency again, the managing director of the International Monetary Fund said as she praised other steps the nation has taken to right its stricken economy. In a wide-ranging interview, Kristalina Georgieva also said Zambia and Ghana, which have both defaulted on their debt, are making progress under their IMF programs, while Tunisia doesn’t need a restructuring yet—but should act soon to shore up its economy.

The US Securities and Exchange Commission is seeking to force Elon Musk to testify as it investigates the billionaire’s purchases of Twitter shares ahead of his takeover of the social media platform. The regulator said on Thursday that Musk failed to appear to testify last month as requested, and asked a judge to force him to. The agency is reviewing Musk’s statements and disclosures about the stock transactions.

The surge in US interest rates over the past year has come at a historic pace, and some industries are having a hard time keeping up. Bankruptcies are rising at the fastest rate since the pandemic, but companies are still taking on more debt—possibly a sign the Fed’s work may not be done. Indeed, restructuring experts and debt investors warn there’s more pain to come. In the Bloomberg Originals mini-documentary America’s Distressed-Debt Problem, we explore the industries that have suffered in this high-rate environment, the sectors that remain vulnerable and those increasingly at risk as the mountain of distressed debt continues to grow.

Bloomberg Originals: Why So Many US Companies Are Going Bankrupt Photographer: Patrick T. Fallon/AFP

• Even China’s closest supporters in Taiwan are turning away from Beijing.
• The German property crisis is claiming its first big victims.
• It’s done: The future belongs to battery-powered electric cars.
• Bloomberg Opinion: A moral case for not engaging with X (Twitter).
• Bloomberg Opinion: Yield curve moves to a fatal dis-inversion.
• Bloomberg Opinion: Ireland’s economy is like a billionaire tech bro.
• No, Donald Trump cannot be Speaker of the House. 

After 123 years of recommending restaurants, the Michelin Guide is moving into the hotel world. At an event on Oct. 5 in Paris, the eponymous publication owned by the French tiremaker announced it would start designating “the most exceptional hotels across the world” not with one, two or three stars, but with a “key” emblem. It will allocate them based on five criteria: having a local character, individuality, excellence in architecture and interior design, top service and comfort, and a consistent value-for-price.

Photograph: Oetker Collection

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