😁 Jobs report confirms soft landing?

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Good morning investors! Last week ended on a positive note and we’re keeping our fingers crossed.

Today we cover:

• Jobs report impresses

• Chinese stocks to rise?

• Investing in China

📊 Economy and News 

Landing ‘em Softly – Job Report Impresses

September's unexpectedly strong payroll numbers have lifted the U.S. economy out of the looming threat of recession, providing the Federal Reserve with a clearer path toward a soft landing.

The job gains were far beyond expectations, with companies and the government adding 254,000 positions, significantly exceeding the Dow Jones consensus of 150,000. This surge was a notable improvement even from August’s upwardly revised figures and broke a trend of declining job growth that had persisted since April, fueling concerns of a potential broader slowdown.

The strong jobs report virtually eliminates the likelihood that the Federal Reserve will consider another half-percentage-point interest rate cut, as it did in September. Futures markets quickly adjusted, now predicting a near-certain chance of a quarter-point rate hike in the Fed’s November meeting, followed by another in December, according to the CME Group’s FedWatch tool.

The Fed is set to meet on November 6-7, just after the U.S. presidential election, with ample time to consider additional economic data.

However, there are still some imperfections in the job market. More than 60% of September's growth came from sectors such as food and beverage services, healthcare, and government—industries that have benefited from significant fiscal spending, contributing to the 2024 budget deficit approaching $2 trillion.

Additionally, technical issues, including a low survey response rate, suggest there could be revisions to these figures in the coming months, potentially tempering the current optimism.

"As we head into the final quarter of 2024, we believe the Fed’s goal of an economic soft landing is now within reach, reducing the likelihood of a near-term recession," Wells Fargo noted.

Global hits:

• The port deal is now in place – no more strikes.

• Brazil rolls out minimum tax on profits of multinational firms.

• Oil prices could shoot up $20 per barrel if Iranian production sees a hit, says Goldman Sachs.

Warning: BCA says investors should fade the real estate rally.

📈 Stocks

S&P 500 5,751.07 (+0.90%)
DJIA 42,352.75 (+0.81%)
NASDAQ 18,137.85 (+1.22%)
BRENT CRUDE 78.05 (+0.55%)
* Prices as of Oct 6th, 12:20 AM UTC

Keep an eye on Chinese Stocks

China's equity markets are expected to continue rising once business resumes on the mainland following the Golden Week break, according to analysts.

Beijing's recent economic support measures helped propel the CSI 300 blue-chip index to a rally of over 25% during a nine-day winning streak. On Monday, the index surged by more than 8%, marking its best day in 16 years, while the Shanghai Composite Index jumped 8.06% before the markets closed for the week-long holiday.

However, Hong Kong stocks experienced a drop on Thursday, ending a six-day rally and raising concerns that China's stimulus-driven momentum could be losing steam.

Investors are now left wondering how long this rally will last.

Eugene Hsiao, head of China equity strategy at Macquarie Capital, believes the rally could extend after mainland markets reopen on Tuesday. He views the Thursday decline in Hong Kong as "short-term profit-taking following the sharp rise" the previous day.

Shehzad Qazi, chief operating officer at China Beige Book International, also anticipates the rally could continue through the end of the year. However, he cautioned that there is a risk of "an ugly reversal in sentiment going into 2025."

Billy Leung, investment strategist at Global X, emphasized that the focus will now be on the effectiveness of any further stimulus measures.

Check this video for more:

Controversial: Stellantis files federal lawsuit against UAW union over strike threats.

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💵 Personal Finance

How Investors Can Benefit from China: Practical Investment Options

Investors interested in capitalizing on China’s economic growth have several avenues to consider, with U.S.-based options offering convenient exposure to Chinese markets.

1. Exchange-Traded Funds (ETFs): ETFs such as iShares China Large-Cap ETF (FXI) and KraneShares CSI China Internet ETF (KWEB) provide access to China’s largest companies and fast-growing tech sector. For broader exposure, funds like the SPDR S&P China ETF (GXC) cover a wide range of industries, making them a practical option for diversification.

2. American Depositary Receipts (ADRs): Leading Chinese companies, including Alibaba (BABA) and Baidu (BIDU), trade as ADRs on U.S. exchanges, allowing investors to benefit from Chinese market leaders without navigating foreign exchanges. This is important because China has capital controls in place, limiting foreign direct access to its markets. However, foreign investors can gain exposure to Chinese A-shares (stocks listed on SSE and SZSE) through specific programs like the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, which allow foreign investors to trade selected Chinese stocks via the Hong Kong Stock Exchange.

3. Mutual Funds: U.S.-based mutual funds like Matthews China Fund (MCHFX) offer exposure to Chinese equities. These funds are actively managed, targeting growth sectors and opportunities within the Chinese economy.

4. Private Equity and Venture Capital: High-net-worth investors might explore private equity or venture capital funds focusing on China’s rapidly evolving sectors like technology, healthcare, and renewable energy, providing an entry into early-stage and private companies.

5. Real Estate Investment Trusts (REITs): Global REITs with exposure to China’s commercial and residential real estate market offer indirect investment opportunities in China’s booming property sector, driven by urbanization and economic expansion.

Want to know more? Check this week’d PRO issue that talks about India v/s China.

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