Five Things You Need to Know to Start Your Day: Americas

Good morning. Stock futures are pointing lower as investors await US jobs data today while JPMorgan now sees a 35% chance the US economy ent [View in browser]( [Bloomberg]( Good morning. Stock futures are pointing lower as investors await US jobs data today while JPMorgan now sees a 35% chance the US economy enters a recession this year. Three-quarters of the global carry trade has now been erased and Warren Buffett may now have an opportunity in Japan. Here’s what markets are talking about — [Morwenna Coniam](. Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. Stocks slump European stocks dropped and [US futures]( slid as the debate around central bank policy decisions continues to fuel market anxiety and investors await key US jobs data today. The dollar weakened against major currencies while treasuries gained before a 30-year bond auction. For a thorough exploration of the recent market selloff, we hosted a live Q&A with a panel of Bloomberg experts you can [read here](. Recession risk JPMorgan now sees a 35% chance that the [US economy tips into a recession]( the end of this year, up from 25% as of the start of last month, thanks to hints of a “sharper-than-expected weakening in labor demand and early signs of labor shedding.” The team kept the odds of a recession by the second half of 2025 at 45%. With US inflation pressures coming down, JPMorgan sees the Fed cutting rates by half a percentage point in September and November. Carry trade wiped JPMorgan has also said three-quarters of the[global carry trade]( now been removed, with a recent selloff erasing this year’s gains. Returns in G-10, emerging market and global carry trade baskets tracked by JPMorgan have fallen about 10% since May, according to the bank, with the selloff significantly cutting into profits accumulated since the end of 2022. Buffett in Japan [Warren Buffett]( saw about $6.7 billion wiped off the value of his holdings in Japanese trading houses in the recent market rout, but his losses narrowed as Japanese stocks recovered. Now he may have an opportunity to buy even more shares at a cheaper price. Buffett’s firm Berkshire Hathaway has a cash pile that reached a record $276.9 billion in the second quarter after offloading [shares]( in Apple. Coming Up… US jobless claims figures due today are in sharper focus than ever after last week’s flimsy payrolls numbers. We’re also expecting wholesale inventories figures and a $25 billion auction of 30-year bonds. On the corporate front, names expected to report earnings include pharma companies Eli Lilly, Gilead and private equity firm Brookfield Corp. What We’ve Been Reading This is what’s caught our eye over the past 24 hours. - The Big Take: What happens when[Ozempic takes over your town]( - [Anti-Racism protesters]( UK respite after days of riots - Saudi Aramco seeks [more China deals]( in oil-to-chemicals push. - [Harris rides momentum]( in Midwest as Vance eyes Air Force Two - Strong [Earthquake hits]( Southwestern Japanese island And finally, here's what Joe’s interested in this morning Good morning. The market volatility isn't over yet. As of the time I'm typing this, the VIX is just shy of 30. S&P 500 futures are down modestly after an ugly green-to-red day. Japan's TOPIX Index fell over 1%. At the end of our interview with [Nomura strategist Charlie McElligott]( (which I wrote about yesterday) he said it was too soon to think the market would return to a steady ascent, where the dip buyers and vol sellers are comfortable coming in. Anyway, so far that's looking correct. Here are a few thoughts I have this morning, again in no particular order. - As McElligott sees it, the market isn't going to stabilize until there's more stability with the underlying fundamentals. To him the "most important" thing that's happened is the re-emergence of hard landing risk in the US economy thanks to last week's Fed + unemployment data combo. Election uncertainty, geopolitical uncertainty, and the uncertainty created by the volatility explosion itself are also headwinds to market stability. - So speaking of hard landing risks, the weekly initial jobless claims are going to be seriously under the microscope for a while, since that's the highest frequency/highest signal labor market data we're going to get while we wait for the next non-farm payrolls report in early September. Also, the claims data cuts right to the heart of the debate about the state of the labor market. One side looks at 4.3% unemployment and says "the Sahm Rule has been triggered and it's possible the wheels are coming off the labor market right now". The other side says "Well... this is not as bad as it looks, because this is still being driven by new labor market entrants having a harder time finding work while actual layoffs are still very low." Regardless of whether you buy the logic of either position, the weekly claims data tells us about the layoffs side of the equation. Today we get the latest reading, and the expectation is for 240K, a tick down from last week's down from 249K. Something to note is that in recent weeks, this number has hit its highest in about a year. But something else to note is that we saw a similar pattern last summer of rising claims. So it's possible that there are seasonal (or seasonal adjustment) factors putting upward pressure on the reported number. Either way, today's report at 8:30 AM ET will get a lot of attention. On Monday morning when stocks were getting pulverized, and the market was suddenly pricing in the possibility of an emergency inter-meeting rate cut, there was a lot of talk about whether the Fed would let itself get "bullied" by the market into aggressive action. Pre-Covid you heard this type of rhetoric every time we got a little growth scare or some other vol spike. It's always the same kind of thing. "It's not the Fed's job to rescue the stock market!" "The Fed shouldn't baby the market." "Traders are throwing a tantrum, demanding that the Fed bail them out." When I hear lines like this, I generally find them to either be missing the mark, or so narrowly true as to be irrelevant. Yeah fine, it's not the Fed's job to make the S&P 500 go up. But the real issue here is that investors are worried that a recession is going to happen, with the Fed waiting too long to cut rates before the unemployment rate shoots up further. Recessions are bad for stocks. So it's not about the Fed bailing out the stock market. It's about the fact that the stock market is reflecting concerns for the actual employment side of the Fed's mandate. If the Fed were to cut off that recession left tail it would likely be very good for risk assets, because the primary underlying cause of the anxiety would have gone away. Is that the Fed bailing out the stock market? Is that the Fed rewarding a tantrum? I don't think so. That just sounds to me like the Fed doing the job given to it by Congress of maintaining stable prices and maximum employment. And then just to add to that, financial markets aren't just a mirror reflecting what's happening in the so-called "real economy". Financial markets also can amplify trends in the real economy, and with stocks down and borrowing costs up this week, we've seen a further tightening in actual financial conditions, which could reverberate back onto economic activity, which further exacerbates the risk of unemployment shooting up. And so for now, every piece of labor data deserves close scrutiny, and we'll wait for more Fedspeak to see if they're setting up for some kind of forceful reaction to any softness. Follow Bloomberg's Joe Weisenthal on X [@TheStalwart]( [Bloomberg Markets Wrap: The latest on what's moving global markets. 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