Archive - Oct 3, 2012 - Story

For some reason, despite the ADP number coming month after month within a 3 std deviation of the actual NFP, and thus confirming it has absolutely no predictive power, vacuum tube headline scanning algos continue to trade off the number which explains why futures had a brief spike moments ago after the latest September ADP Private Payrolls number came out at 162K, on expectations of 140K. Of course, last month's print which initially came at 201K only to see the August NFP come in at less than half this print, was revised materially lower to 189K, as was the July ADP which was cut by 17K to 156K. But who cares - the algos already had done their ramp job a month ago. Remember: in an election year, all Initial Claims will be revised upward, while all ADP. NFP prints must be revised downward - it's not called the economy for nothing. In other news, when adding the +/-150,000 margin of error on both side of the equation, we can boldly say that according to the ADP, Friday's NFP will come in a range of -1,000,000 to +1,000,000. Perhaps the only relevant datapoint in the entire ADP report is that manufacturing jobs added were 4,000 in September. Only 996,000 more to go until we hit the president's solemn promise of revitalizing US manufacturing. There was however, a last hurrah for Wall Street: "The financial services sector added 7,000 jobs in September, marking the fourteenth consecutive monthly gain." Correct: the Wall Street layoffs usually begin just before bonus season.

Less than impressive PMIs from Europe, as well as China failed to depress the bullish sentiment as market participants remained hopeful that a full scale bailout of Spain will take place in the very near future. As a result, in spite of opening lower, equity markets in Europe have edged into positive territory, supported by utilities and telecommunication sectors. Banks also posted decent gains, after Spanish economy minister outlined the bad bank plan which is to be financed with senior debt and private investors to have majority stake in bad bank. The bank recap plan is expected to be running by start of December. Italian markets outperformed, largely due to the fact that today’s Italian Services PMI posted a minor improvement on the previous reading. Bond yield spreads continued to tighten, however flows remained light ahead of the ECB policy meeting tomorrow, as well as the latest round of issuance from Spain and France. Heading into the North American open, EUR/USD is trading little changed as demand from Middle Eastern, as well as EU semi-official accounts was offset by risk event (ECB, auctions) pre-positioning. Going forward, the second half of the session sees the release of the latest ADP Employment Report, ISM Non-Manufacturing and the weekly DoE inventory survey.

• No Joy on Wall Street as Biggest Banks Earn $63 Billion (Bloomberg)
• And more good news: IMF’s Blanchard Says Crisis Will Last a Decade (Reuters)
• Hobbit Returns to Find Middle Earth Has Become Expensive (Bloomberg)
• Freddie's Foreclosure Plan Hits Roadblock (WSJ)
• Who will buy the FT? Pearson CEO Scardino Will Step Down as Fallon Takes Over (BBG)
• Jeremy Lin Said to Be in Talks With Harvard on Licensing Deal (Bloomberg)
• Jon Weil tears apart the NYAG "prosecution" - Eric Schneiderman Will Have to Do Better Than This (BBG)
• Portugal Offers to Exchange Bonds as It Seeks Debt Market Access (Bloomberg)
• Is unlimited growth a thing of the past? (FT-Martin Wolf)
• European Bank Capital Results Overtaken by Tougher Global Rules (Bloomberg)
• China’s Slowdown Reverberates as ADB Cuts Forecasts (Bloomberg)
• Tokyo has no plan to extend currency swap deal with Seoul (Reuters)

Tonight's session has been even more boring than yesterday's, when nothing happened. Several data points came out of Europe, some better than expected, some worse, but all massively beaten down to where any uptick is merely a dead cat bounce. Retail sales in the euro zone rose 0.1 percent in August from July, when they also gained 0.1 percent. From a year earlier, sales dropped 1.3 percent. A composite PMI of manufacturing and services industries in the euro area fell to 46.1 in September from 46.3 in August, Markit Economics said. That’s above an initial estimate of 45.9. The problem is that the PMIs of the most notable countries: Germany (at 49.7 on expectations of 50.6, lowest since March 2006), France (45.0, down from 46.1, and below consensus of an unchanged print -keep a close eye on this suddenly fast-motion trainwrecking economy), Spain, UK and Sweden all missed badly. In the U.K., where the services PMI dropped to 52.2 in September from 53.7 in August. But don't call it a stagflation: it's been here for years - U.K. retail prices rose 1 percent in September from a year earlier after a 1.1 percent gain in August, the British Retail Consortium said. Some additional data via BBG - Britons injected a net 9.8 billion pounds into their housing equity in the second quarter, the Bank of England said. Elsewhere, one central bank that refuses to join the global easefest is, not surprisingly, Iceland’s central bank kept the sevenday collateral lending rate unchanged at 5.75 percent for a second meeting. None of this has been able to move the futures which are net flat with Treasuries steady, before the US ISM Services number (est. 53.4 from 53.7), the total joke of an indicator which is the ADP Employment (est. 140k from 201k) but which wrong as it always is, is the only advance hint into Friday as traders prepare for Friday’s nonfarm payrolls report (est. 115k, unemployment rate rising to 8.2%).

While some may think that having an unelected technocrat is all fun and games, in Rome at least one person begs to differ. The person is Marcello Di Finizo, an Italian restaurateur, who has "staged a spectacular protest by spending the night between Tuesday and Wednesday on top of Saint Peter's Church in Rome." He is still there now and his expliot can be seen live on the webcast below.