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Sweet Baby Jesus:

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Just before midnight on election day

The markets could be interesting tomorrow:

Panicked investors rushed to unwind bets they’d piled on amid predictions Clinton would sweep to victory. Futures on the S&P 500 Index plunged more than 4 percent and Mexico’s peso — which tends to weaken as Trump’s prospects improve — sank by the most in two decades. U.S. Treasuries, the yen and gold all soared by the most since Britain’s surprise vote to leave the European Union sent shockwaves through markets in late June.

Jobs, jobs, jobs!

Employers in the U.S. added 161,000 non-farm jobs in October, the Bureau of Labor Statistics reported on Friday. The unemployment rate ticked down to 4.9% from 5%. This marks the 73rd consecutive month of job growth.

Economists expected to see 178,000 jobs added and for the unemployment rate to tick down to 4.9%.

“Employment continued to trend up in health care, professional and business services, and financial activities,” the BLS said in its release, going on to explain that health care added 31,000 jobs last month. Over the past year, health care has added 415,000 jobs.
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The bigger story within the report very well may be on the earnings front. The BLS reported that average hourly earnings for all employees on private non-farm payrolls rose by 10 cents to $25.92 in October. Over the past year, average hourly earnings have risen 2.8%. Economists point to this as reason to believe the U.S. labor market has reached full employment — and that the Federal Reserve will hike interest rates by 0.25% in December.

Bloomberg adds:

The larger-than-expected wage increase in October was helped by a 2 percent jump from September in hourly pay of utility workers, who scrambled to get power and telecommunications restored after Hurricane Matthew struck the southeastern U.S. The gain was the largest since November 2012, when there was a 2.5 percent surge in the aftermath of Hurricane Sandy — a gain that partially reversed the following month.

Other gauges show pay gains rising. The Atlanta Fed’s Wage Growth Tracker indicates median pay rising an average 3.6 percent over the past three months, matching the fastest rate since January 2009. The Labor Department’s Employment Cost Index was up 2.3 percent in the third quarter from a year earlier, matching the second-fastest pace of this expansion.

There were even jobs – of a sort – in Canada!

Part-time work has become the mainstay of job creation in Canada, a worrisome trend in the country’s labour market.

From September to October, part-time employment jumped by 67,000 spots and full-time fell by 23,000, according to Statistics Canada’s monthly labour report released on Friday.

Even though Canada gained a net 44,000 jobs last month, the number of hours worked declined because of the shift from full-time work to part-time.

… and the Society of Canadians for Trump has 63,000 new members!

Nowhere was this [lack of momentum in the economy] felt more than among men who are in their prime working age of between 25 and 54. This cohort has suffered a staggering loss of 63,000 full-time positions over the year, compared with a gain of 36,000 part-time spots.

… but the market focussed on the American election:

U.S. stocks posted their longest slide since 1980, while Treasuries rallied after data showing progress in the American labor market did little to soothe anxiety over the presidential election. Oil slumped.

The S&P 500 Index dropped for a ninth straight day, a gauge of equity volatility had the longest stretch of gains on record and Treasuries climbed the most since September ahead of next week’s vote. All the jitters sent the dollar down after a brief advance that followed data showing U.S. jobs rose at a steady pace in October, supporting a Federal Reserve hike next month. Oil sank as hopes faded that OPEC will be able to implement a deal to cut output.

The incompetent have their shorts in a knot because Standard Chartered did not honour a pretend-maturity:

Perpetuals are popular because bonds without a legal maturity date may qualify as equity according to International Financial Reporting Standards, reducing a company’s leverage in the eyes of banks and making it easier for them to get lower rates on loans. Investors buy them because they’re pretty certain they’ll be redeemed in full at the first call.

In other words, these are three- to five-year notes that pay higher yields than regular securities of a similar tenor.StanChart has now challenged that notion.

The London-based lender said in its third-quarter earnings statement Tuesday that it wouldn’t exercise the option it has in January to buy back its $750 million of 6.409 percent non-cumulative redeemable preference shares that were issued in 2006.

That makes sense, from the bank’s standpoint. After January 2017, the notes convert to paying three-month Libor plus 151 basis points. At current levels, that translates into a yield of less than 2.4 percent. StanChart’s 10.5-year 4.3 percent dollar bonds due 2027 are yielding 4.5 percent.

The fact a perpetual might not be called isn’t something most investors consider when they purchase the notes. Now, they’re having to think about what would be a fair price for a lot of the debt they hold if, when the time comes, it may be cheaper for a company not to act.

In today’s FOMC release:

The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further. Inflation is expected to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives.
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Voting against the action were: Esther L. George and Loretta J. Mester, each of whom preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

Some were fascinated by the word “some”:

The Fed’s use of the word “some” versus the harder-hitting “next meeting” phrasing of October 2015 to signal an approaching move was appropriate for several reasons, said Vincent Reinhart, chief economist at Standish Mellon Asset Management Co LLC in Boston, who in his former role as a Fed economist has helped draft statement language.

Investors prior to the meeting had already priced in about a 70 percent probability of Fed action next month, so there was no need to hammer home the point. The chances of a move shifted up to 80 percent following release of the FOMC statement.

PerpetualDiscounts now yield 5.13%, equivalent to 6.67% interest at the standard equivalency factor of 1.3x. Long corporates yield a smidgen under 3.8%, so the pre-tax interest-equivalent spread is now about 290bp, unchanged from the October 5 report.

Today’s top news story is that people lash out when disturbed by change:

In this western Wisconsin enclave and other pockets of the rural Midwest, Mr. Trump’s pledge to build a wall along the Mexican border and prioritize jobs for American workers has struck a chord with some whites uneasy over rapidly changing demographics. They said they are worried illegal immigrants are crowding schools and unfairly tapping public assistance, problems they believe Mr. Trump would fix.

The Journal identified the epicenter of this shift using the diversity index, a tool often used by social scientists and economists. It measures the chance that any two people in a county will have a different race or ethnicity. In 244 counties, that diversity index at least doubled between 2000 and 2015, and more than half those counties were in the cluster of five Midwestern states. The analysis excludes tiny counties that produce numeric aberrations.

Traditional immigrant gateways like Los Angeles, Miami and Queens, N.Y., draw a far greater number of Latino and other minority residents, but because they have long been melting pots, their diversity has barely changed over the past 15 years.

In 88% of the rapidly diversifying counties, Latino population growth was the main driver. In about two-thirds of counties, newcomers helped expand the overall population. In the remaining third, the population fell despite an influx of new arrivals, which magnified the shift for locals as their peers died or moved away.

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