Archive - May 3, 2013

On the surface, the April jobs number was better than expected: in the grand scheme of things, it kept in line with the growth of the overall US labor force (which grew by 210K per the household survey) - the bare minimum in needs to keep the unemployment rate in line. A quick look beneath the surface does reveal the usual question marks, however.

Markets are reacting strongly to the (+/-200k) payrolls report. The considerably better than expected number appears to be full risk-on (despite its potential for bringing the end of QE sooner). S&P 500 futures smashed through stops and stromed above 1600 for the first time ever. Treasury yields snapped 6bps higher. Gold plunged $25 and the USD surged. JPY appears the biggest mover for now with a 120 pip swing lower. Question is... will the knee-jerk hold through the open? VIX futures are down a mere 0.3 vols on the news.

Following the March NFP disappointment, it was only reasonable to expect a modest beat in this month's data which came at +165,000, on expectations of +140,000, and also following a revision to the March number from 88K to 138K. The unemployment rate declined from 7.6% to 7.5% beating, expectations of an unchanged print. The flipside, as always, is that the labor participation rate remained flat, at 63.3%, once again the lowest since 1979.

Will this be the first instance in history of too many fired leading to an actual fire? Let the jokes begin.

• Bank of America 125K
• UBS 130K
• Deutsche Bank 140K
• Citigroup 140K
  
• JP Morgan 145K
• Goldman Sachs 150K
  
• Barclays 150K
• HSBC 170K

• U.S. Bulks Up to Combat Iran (WSJ)
• Taking sides in Syria is hard choice for Israel (Reuters)
• Gold Traders Most Bearish in Three Years After Drop (BBG)
• It's a Hard Job Predicting Payrolls Number  (WSJ)
• EU economies to breach deficit limits as economic picture darkens (FT)
• IBM Says U.S. Justice Investigating Bribery Allegations (BBG)
• At Texas fertilizer plant, a history of theft, tampering (Reuters)
• SAC Sets Plan to Dock Pay in Cases of Wrongdoing (WSJ) - "in case of"?
• EU to propose duties on Chinese solar panels (Reuters)
• Billionaire Kaiser Exploiting Charity Loophole With Boats (BBG)
• SEC Zeroing In on 'Prime' Funds (WSJ)
• Apple Avoids $9.2 Billion in Taxes With Debt Deal (BBG)
• China April official services PMI at 54.5 vs 55.6 in March (Reuters)

While everyone's attention this morning will be focused on the sheer, seasonally-adjusted noise that is the monthly NFP report (keep in mind that any number +/- 200,000 of the actual, is entirely in the seasonal adjustments and is thus entirely in the eye of the Arima X 13 beholder), which is expected to print at 140,000, resulting in an unemployment rate of 7.6%, there were some events overnight worth noting. First, the China non-manufacturing PMI printed at 54.5 in April, down from 55.6, and tied with the lowest such print in two years. The biggest red flag was that New Orders dropped below 50, with the price index also declining sharply, indicating that either the Chinese slowdown is for real, and the national bank will have no choice but to ease unleashing inflation, or that the politburo wishes to telegraph to the world that China is slowing, because what goes on in China, and what data is released out of China are never the same thing. Elsewhere, in Europe Mario Draghi's henchmen were stuck in damage control mode, and Ewald Nowotny said markets over-interpreted a signal yesterday that the ECB would consider a deposit rate below zero. Policy makers have “no plan in this direction,” Nowotny said in an interview with CNBC today. This helped boost the EUR from its languishing levels in the mid 1.30s higher by some 50 pips following his statement.

FX market overreacted yesterday to ECB developments. Europe has corrected it and now participants will take a fresh look after the US employment report.

The Matrix was a movie released on 33-11-999, or as more commonly formatted (in the USA), 3-31-1999.  In the 14 years since it's debut it has become one of the most influential cultural icons of any generation, not only here in America but throughout much of the globe.  Everyone, at least those ones in Western sphere societies, somehow, can readily identify with it.  I wonder why?

One year after the infamous Jamie Dimon "tempest in a teapot" fiasco, which promptly turned out to be the biggest TBTF prop-trading desk debacle in history, things were going well for JPMorgan. On one hand, the chairman of the TBAC (and thus US Treasury advisor and policy administrator), and former LTCM trader, Matt Zames, was just recently promoted to the sole second in command post at the biggest US bank (and 2nd biggest in the world) by assets, and first in line to take over from Jamie Dimon. On the other hand, one of Mary Jo White's former co-workers, and a JPM defense attorney from Debevoise just became head of the SEC's enforcement division, in theory guaranteeing that the US government would never do more than slap the wrist of JPM in perpetuity. And then, when everything seemed like smooth sailing ahead, the Federal Energy Regulatory Commission (FERC) showed up on March 13, the day before Carl Levin's committee released its latest report on JPM's prop trading blunder, and according to the NYT, alleged that JPM in the past several years, quietly became nothing short than the next Enron. ... But what is worst for JPM, and its brilliant (abovementioned) employee, often times credited with creating the Credit Default Swap product and market (simply an instrument to trade credit with negligible upfront collateral and thus allow equity option-like speculation in the credit realm), is that FERC may be seeking to throw the book at none other than Blythe Masters.