Archive - Jan 6, 2012

The nonfarm payroll number prints at 200K on expectations of 155K. The Unemployment rate comes at 8.5% - lowest since February 2009, and down from an upward revised 8.7%. U-6 15.2% down from 15.6% in November. Average hourly earnings rose at 0.2%, in line with expectations, previous revised to -0.1% from unchanged. Private payrolls +212L vs Expectations of 178K. Manufacturing payrolls rose 23K vs Expectations of 155K. Yet the unemployment rate trickery still continues, with labor force participation (prior revised), now at a 27 year low of 64%, and the labor force itself declined by 50K from 153,937 to 153,887. In fact, persons not in the labor force have increased by 7.5 million since January 2007! Bottom line - dropping out of labor statistics is the new killing it.

We dont' need any water, let the mo@#$#%ker burn!

Fitch joins the Hungary "junking" parade, which centers around the country's former unwillingness to yield to the banking cartel regarding its central bank, which as of today is no longer the case: "The downgrade of Hungary's ratings reflects further deterioration in the country's fiscal and external financing environment and growth outlook, caused in part by further unorthodox economic policies which are undermining investor confidence and complicating the agreement of a new IMF/EU deal."

• Markets await US Non-Farm Payrolls data, released 1330GMT
• UniCredit experiences another disrupted trading session, trades down 11%, then returns to almost unchanged
• Iran causes further unease with plans to engage in wargame exercises in the Strait of Hormuz

• So very encouraging - IMF's Lagarde: euro likely to survive 2012 (Reuters)
• Drop Greek bond plan, urges ECB council member (FT)
• Soros says EU break-up would be catastrophic (Reuters)
• Japanese Banks Get 'Stress Tests' (WSJ)
• Hungary Pledges Compromise on IMF Loan (Bloomberg)
• Confidence in London property falls (FT)
• Fed nears an adoption of an inflation target as Bernanke pushes transparency (Bloomberg)
• Seoul and Tokyo seek to ease Iran oil ties (FT)

Today we get the December employment report and a murder of Fed Doves speaks later in the day.

The selloff in crude yesterday, provoked by this Reuters article stating that Iran is ready to resume nuclear talks with the West, is now well over and the accumulation has again resumed, following (not so) stunning news that merely days after its 10 day Straits of Hormuz military exercise ended, the country is already preparing for yet another, "massive" naval exercise. As RT reports, "Iran is planning to hold new “massive” naval exercises near the strategic Strait of Hormuz within the next few weeks, the country’s Fars news agency has said, as Tehran’s tensions with the West continue to escalate following threats of new sanctions against the Islamic Republic over its controversial nuclear program." And this time the wargame comes with a twist - it will likely occur just across from a comparable drill ran jointly by the US and Israel: "The newly announced Iranian drills, codenamed The Great Prophet, may coincide with major naval exercises that Israel and the United States are planning to hold in the Persian Gulf in the near future. AP quoted on Thursday a senior Israeli military official as saying the drills would be held in the next few weeks." And since the Tonkin Gulf Resolution script is being used point by point, any lost escalation "chances" in the end of 2011 will surely be regained within days.

According to Bloomberg's First Word Cross Asset Dashboard, sentiment rose modestly in European session and into U.S. open, with EU and U.S. equity indexes as well as Bunds and Treasury yields modestly higher, Bloomberg analyst TJ Marta writes in following note:

• Payrolls est. 155k; market possibly expecting upside surprise after yesterday’s ADP 325k vs est. 178k
• After most Asia equity indexes fell moderately, EU equity indexes, U.S. futures modestly higher; S&P futures +0.7%
• Treasury yields modestly higher ~1bps; Bund yields modestly to significantly higher, led by 2-yr +3.6bps
• FX, commodities, EU sovereign yield to Bund spreads mixed in mostly modest ranges
• In Europe, Hungarian bonds jumped by the most in 6 weeks following hope that talks between the Premier, Central Bank Chief and Ministers would resolve the IMF rescue impasse. The meeting was concluded with Orban saying that Hungary wants IMF aid and is ready to support central bank - in other words Hungary just caved to the banking status quo. CDS declined modestly from all time records.
• Germany November factory orders collapsed by 4.8%, on expectations of a 1.8% drop - biggest drop since September 2008 - the recession has now firmly moved into the core.
• ECB deposit facility usage rose to a new record of €455.3 billion.
• Liquidity conditions are measured by Swap Spreads improved modestly, and are now at early November levels: the 3M EURUSD basis swap rose 6.8 bps to -102.25, highest since November 7; the 3M Euribor/OIS dropped to 0.93, lowest since November 25

Troika inspectors will leave angry again. But this time, the Prime Minister put the nuclear option on the table....