Together with

Good afternoon,

You know French banks down bad when even the country that that didn’t touch FIFA finds so much much material on you, they have to raid.

Stateside, gold and oil are the latest competitors in Powell's own pickleball bowl. Oil prices are surging post-OPEC’s surprise production cut, meanwhile gold is casually sitting near $2K/ounce.

Let’s dive in.

Economy Heat Check

As of 3/31/2023 market close, unless otherwise stated.

But first, a message from today's sponsor: Pattern

Taxes rain on your bonus parade? Next time, talk to Pattern.

Get answers to tough financial questions with your matched financial advisor, and take action right in the same app with asset management tools and access to private equity investments (coming soon). Welcome to your new digital family office.

Get Pattern now with no minimums.

Sign up for Pattern and take control of your financial future, and use invite code "LIT" to get a three-month free trial.

Bad News Briefings

Market movers like to bury bad news on Friday afternoon, so we've decided to excavate them.

• Endeavor nears deal to acquire WWE (WSJ)

• Ovintiv nearing deal to acquire EnCap’s midland assets (Reuters)

• Apollo to buy Univar in $8.1B deal including debt (WSJ)

• UK government threatened with legal action over Australia trade deal (FT)

• China instructs state firms to phase out big four auditors (Guardian)

Performance Review

Firm updates your bank may be less inclined to disclose.

• UBS to cut staff up to 30%; Prosecutors look at CS deal (Reuters)

• Norway Wealth Fund to vote against seven Credit Suisse directors (BBG)

• HSBC’s top executives face HK shareholders amid spinoff pressure (US News)

• Sunak’s crypto plan at risk as HSBC and NatWest restrict transfers (BBG)

• US and South Korea fight over extradition over crypto fugitive Do Kwon (WSJ)

• The ex-UBS MD who contributed to Credit Suisse's meltdown (EF)

• McKinsey’s long history of ruining Credit Suisse (EF)

Week Ahead: Signal to Noise

Next week’s market outlook and whether you should actually care.

• Monday, April 3: S&P Global Manufacturing Purchasing Managers’ Index (🐂); ISM Manufacturing Index (🐻)

• Tuesday, April 4: JOLTS job openings (🐻)

• Wednesday, April 5: ADP employment change (🐻); ISM Services Index (🐻)

• Friday, April 7: US monthly jobs report (🐂)

Signals 🐂

US Monthly Jobs Report

It’s a shortened week for some in the eurozone and the UK for the Good Friday bank holiday. The US is built different, so while your Euro peers are pouring one out over pints, we’ll have our most important economic release of the week: the US monthly jobs report.

Or, as that back-office accountant calls it, the nonfarm payrolls report. Always a trader’s favorite, this month’s jobs report is as relevant as ever to try and decipher whether the Fed will succumb to market pressures or keep hiking rates. Ultimately, the employment situation remains tight by historical standards. But, it’s not as tight as it was.

Taking job growth, the past three nonfarm payrolls figures have all been above 239k, with one above 300k and another above 500k. Yet, the 12-month trend is clearly pointing lower as job growth slowly loses momentum.

Consensus still doubts we’re going to see the Fed even considering mentioning the word “cut” until we see negative job growth and a materially higher unemployment rate. Yeah, friendly reminder inflation is still way above 4%. And that leaves the USD vulnerable to buying pressure if this month’s nonfarm payrolls report keeps on punching out strong numbers.

Flash PMI Data for the US, Europe and APAC

PMI data is always closely watched, as it provides a forward look at growth potential. The “flash” is generally the more exciting release because it could prompt more volatile market reactions. Especially if the prints surprise with an expansion or contraction (i.e. above / below 50).

But this month’s global PMI data releases are more important now than ever (in recent history, we’ll not get too sensationalist as some – cough, Bloomberg – are). And the reason is the same as the first signal above (nonfarm payrolls) – traders are trying to decipher whether central banks are nearing the end of their tightening cycles.

Throughout the week, we’ll have a selection of services, manufacturing and composite (services and manufacturing combined) reads. You’ll also get the classic ISM report on business for the US (below).

A common theme of late is to see services PMIs expand faster than forecast, and manufacturing has recently been contracting at a slower rate. “Prices paid” also warrants a look for inflationary pressures across the globe. Keep an eye on new orders as well, which can provide a lead on the headline data.

Noise 🐻

JOLTS Job Openings & ADP Employment Change

Don’t get ahead of yourself. Not Friday’s nonfarm reports. So as much as Jim Cramer may be screaming about the state of the labor market mid-week, Friday is the day you have to pay attention to.

This week’s earlier jobs data is so irrelevant, we even let the intern contribute their monthly sentence of analysis on it. Here we go:

ADP remains stable, the participation rate trends higher, although we’re seeing very early signs of a trough for unemployment and underemployment. That’s it.

ISM Manufacturing & Services Index

Traders may be side-eyeing the ISM surveys this week, with manufacturing kicking off Monday followed by services on Wednesday. The ISM (Institute for Supply Management) manufacturing index, also known as the purchasing managers' index (PMI), is a monthly indicator of U.S. economic activity. Though it’s considered by some to be a key indicator of the state of the US economy, that story is being written by inflation, jobs and now the occasional bank failure.

One interesting adjacent signal to watch are the current Cass Freight volumes & expenditures. The Cass Freight Index provides insight into North American freight volumes and expenditures . When both Cass indices turn sharply negative year over year, a recession usually follows.

You guessed it – we’re near such a point right now (below).

Undrafted

All other speeches and prints.

• Monday, April 3: Construction spending; Vehicle sales; Fed Governor Cook speaks

• Tuesday, April 4: Factory, durable goods and capital goods orders; Cleveland Fed’s Mester and Cook speak

• Wednesday, April 5: MBA mortgage applications; Trade balance

• Thursday, April 6: Weekly jobless claims; Challenger job cuts; St. Louis Fed’s Bullard speaks

Meme Bank

Advertise with us // Visit our merch store // Invest alongside Lit Ventures

It's that time of the year — our annual performance review. You can let us know any thoughts, comments or ways you want to see the newsletter improve. Or, just rate our performance.

We appreciate any time you take to fill out the survey — we hope it goes a long way. We'll keep you all updated on any conclusions and changes.

Be as brutal as needed, the interns can handle it.