Archive - Dec 2010 - Story

Another day, another set of completely contradictory economic numbers. First, in an earlier release Challenger announced that employers planned on firing 48,711 people in November compared to 37,986 in October, led by a "surge" in the non-profit sector where 10,761 layoffs were pending. "Government and non-profit job cuts are down 16 percent from a year ago, but that is probably little consolation to employees in the sector, which is still struggling despite signs of recovery in other areas of the economy," John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement. This was the highest downsizing number reported in 8 months. And then less than an hour later, ADP comes out with its traditionally noisy number that tends to have zero correlation to the upcoming NFP result, and observes that the churn in the labor force is starting to pick up, with a change in private payrolls of +93K compared to expectations of 70K, and a prior revised number from 43K to 82K. This was the highest since November 2007. Net net: more people hired, more people fired. Judging by the futures response, this is good.

Today's much anticipated Portuguese T-Bill auction carried some good and some not so good news. While the Bid To Cover on the €500 million 12 month paper improved from 1.8 to 2.5, the rate on the 1 year issue surpassed 5% for the first time, and came wide of analyst expectations, pricing at 5.281%, compared to 4.813% previously. Per Reuters: " That was higher than the roughly 5 percent that dealers and analysts had looked for ahead of the sale, though the rise in short-term borrowing costs was much smaller than a more than 150-basis point jump at the previous tender in November.  "There is no place to hide on the curve for Portugal anymore. Once again, the auction increases pressure to find a circuit-breaker to limit the damage, which is most likely to mean asking for aid," said David Schnautz, debt strategist at Commerzbank in London." Filipe Silva, debt manager and Banco Carregosa explains why contrary to the EUR's reaction, this is not good news: "This rate is very high and Portugal cannot keep raising its rates at this pace, 47 basis points in just two weeks." Yet despite the weak auction, Sovereign spreads tightened modestly after rumors that the ECB would announce an expansion or a new program to buy peripheral sovereign debt. Which was to be expected: the Portuguese auction was quite irrelevant compared to what happened in Germany earlier, when the country held its weakest 5 Year Bobl issuance in 6 months: in an auction of €4.13 billion in paper, the government saw a mere 1.1 Bid To Cover, the weakest since May, and forcing the government to retain 17.4%, or €0.87 billion of the auction to make it not appear that the auction was a failure.

• API: Crude inventories down 1.14 mln barrels.
• Australia’s GDP expanded 0.2% in Q3 - half the pace economists estimated.
• Bernanke: US growth too slow to dent unemployment.
• China's official manufacturing PMI rose to 55.2 in November from 54.7 in October.
• Consumer Confidence in US rises more than estimated to a five-month high.
• Euro trades near 11-week low as Europe debt crisis prompts risk aversion.
• Real-estate prices in 20 US cities rose in Sept at the slowest pace in 8 months.

A ton of data today, covering the labor market, conditions in manufacturing and construction, auto sales, and productivity. We also hear from Vice Chairman Yellen, two other members of the FOMC (Gov. Tarullo testifying on mortgage servicing at 10:00; Dallas Fed President Fisher speaking on the economy at 13:00), and the beige book. And, as always, most importantly today's POMO is at 11:00 am. Additionally, the Fed releases a data dump of information on bailed out banks at noon.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 01/12/10

But while everyone’s eyes are on Portugal, the action is starting to really brew in Belgium and Hungary/Austria, all three of which I’ve mentioned as “potential next legs” in recent pieces. Belgium’s €1.425b 3mo bill auction saw a menial bid-to-cover of 1.48 today, much lower than the 3.52 last month, and yielded 86.4bps, almost 10bps higher than prior. Six months of no government and a 101% debt/GDP aren’t helping to remove Belgium from the cross hairs.