Archive - Nov 7, 2014 - Story

In October the US economy added the most waiters and bartenders in over a year. In fact at 42K, one in every five jobs "created" in the US economy went to a bartender, or a waiter.

The central planners are in a state of fear and panic.  They are trying everything and anything to create market validation for their policies, watching with trepidation as their favored economic metrics fail to respond to all of their frenzied efforts. They are so far over the tips of their skis right now that there's nothing they won't do.  By the time a central bank is behaving as recklessly as Japan, it's time to edge towards the exit, because the chance of a flash fire in the building has grown uncomfortably high. That is, instead of providing comfort, these most recent moves should invoke greater worry for those of us alert enough to see them for what they are: acts of panic.

Having promised that he would not run again if unemployment rates remain high, French President Francois Hollande faces not just record low approval ratings but feces-flinging-farmers. In a show of protest against expressing their anger at collapsing prices (due in part to sanctions against Russia), increased environmental regulations, cheap imports, and high costs, thousands took to the streets, dumping pumpkins, potatoes, and carrots, burning cars, flinging apples, and spraying shit all over a government building in Toulouse. The French are not amused...

A week ago the Russian Ruble exhibited intraday volatility that makes the JPY look quiet when it crashed to record lows then soared dramatically on intervention hopes. Since then we have had a Russian Central Bank disappointment and some jawboning which did nothing press the Ruble to record-er lows against the USD. Then today, last week's volatility in the Ruble was dwarfed when USDRUB blew past 48.5 only to be sent soaring (USDRUB lower) below 46 on hope of intervention. Russia is not alone. The Saudi Riyal has seen massive vol in recent weeks and Nigeria, another oil-producing nation, saw the Naira collapse yesterday then soar 8 handles this morning on what is confirmed intervention by the nation's central bank. It appears the strong dollar is becoming an issue for the world's oil-producing nations...

Treasury yields were leaking higher into the print then collapsed on the headlines. Stocks smashed higher on the 'good' news of a lower unemployment rate then read the details and have plunged. Silver prices smashed higher, futures were halted, then tumbled back. Total and utter chaos in the liquid markets... Is "good" news now bad news?

Following last month's total collapse in the participation rate, dropping to 36 year lows, this month there was a modest improvement in the composition of the labor force, with the Household Survey suggesting the ranks of the Employed rose by 683K people, while the Unemployed actually declined by 267K, leading to a drop of the people not in the labor force to 92.378MM from 92.584MM. In other words, a little over 101 million Americans are unemployed or out of the labor force. Still, if only looking at this metric, the Fed would likely have no choice but to proceed with a rate hike in the first half of 2015.

Following the gross distortions of the ISM Services Employment index, which printed at a seasonally adjusted near record high, the whisper number for today's NFP was well above the official consensus estimate of 235K. Instead what happened was, naturally, what nobody expected: a miss, with the headline print coming in at 214K, well below the 235K expected, and down substantially from last month's upward revised 256K. Looks like the momentum is stalling fast. And  just to complete the farce, the unemployment rate of the nation that just threw out democrats in protest over the economy.... dropped to 5.8%

• US Change in Nonfarm Payrolls (Oct) M/M Exp. 235K (Low 140K, High 314K), Prev. 248K, Jul 180K.
• US Unemployment Rate (Oct) M/M Exp. 5.9% (Low 5.8%, High 6.1%), Prev. 5.9% European
• This will be the first employment report since the Fed announced the conclusion of QE3
• Stronger data of late has increased expectations of a solid October report
• Seasonal factors could also be supportive
• Focus could again may turn to the wage component of the jobs report as the Fed looks to exit easy policy

There was a time when the merest hint of Russia military activity at the Ukraine border would do the unthinkable: challenged central planners and send stocks lower. Who can forget the market drubbing when the Russian humanitarian convoy was going to enter east Ukraine and allegedly carry a DIY army? Well, those days are long gone. Because with Ukraine repeating day after day after day, how many Russian soliders have entered the country, how many artilery shells have landed, and how Putin is just salivating to invade the economically devastated country, everyone completely tuned out. Case in point, yet another report earlier today from Kiev, according to which "a column of 32 tanks, 16 howitzer artillery systems and trucks carrying ammunition and fighters has crossed into eastern Ukraine from Russia." Market reaction: absolutely none.

• The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare (Matt Taibbi)
• Explains the midterm results: Optimism precedes job data (Reuters)
• EU Dream Ebbs Amid Weak Growth, Putin's Jets, 25 Years After Wall Came Down (BBG)
• SEC Probing Trading Activity at Apple Supplier GT Advanced (WSJ)
• Boehner touts bills to repeal Obamacare, build Keystone (Reuters)
• China Gold Buying Means Price Floor to Standard Chartered (BBG)
• High-Speed Ad Traders Profit by Arbitraging Your Eyeballs (BBG)
• Central Banks Can’t Be ‘Only Game in Town’ Boosting Economies (BBG) - less talking, more getting to work

European shares fall, reversing earlier gains, with the banks and tech sectors underperforming and basic resources, oil & gas outperforming. Companies including ArcelorMittal, Allianz, Swiss Re, Richemont released results. The Spanish and Italian markets are the worst-performing larger bourses, the U.K. the best. The euro is stronger against the dollar. Japanese 10yr bond yields rise; German yields increase. Furthermore, the pullback in the USD-index from overnight highs has also provided the commodity complex with some upside and thus has seen basic materials and energy name outperform to the benefit of the FTSE 100. Elsewhere, Allianz’s (+4.9%) impressive pre-market report has helped halt the move to the downside for the DAX which trades with modest gains of 0.3%. Fixed income markets continue to hold fire (albeit in marginal negative territory) with volumes exceedingly thin ahead of key risk events. And with that, all eyes move to today's Nonfarm payroll expected to print at 235K, after last month's 248K. Something to keep in mind: the average seasonal adjustment to the October data is almost exactly 1 million, so yet again the fate of the US and global economy, will be determined by an Arima X 13 "fudge factor."