Overview: Markets in positive territory this morning in anticipation of U.S. employment figures estimated to show an improving labor market.
U.S.: Hawkish comments out of the Fed yesterday as the Minneapolis Fed President said that the Fed could increase rates by the end of this year, way before market expectations. The Richmond Fed President also called for a decrease in QE2. Estimates for March payroll figures due out today show declines with nonfarm at +190KE v +192K prior, private at +210KE v 222Kprior and manufacturing at 30KE v 33K prior. The unemployment rate will be released morning, with markets expecting no change from February’s 8.9%. Although jobless claims and ADP data were disappointing earlier this week, the releases still kept in line with encouraging trends, so expect today’s labor market data to follow. We think the risk is to the upside with jobs numbers, but the unemployment percentage read is difficult to say as it has dropped on lack of labor force participation versus true gains. ISM numbers out this morning should stay close in line with the developing recovery in the manufacturing sector: 61.0E v 61.4 prior. ISM Prices Paid is estimated to rise to 82.9E v 82.0 prior as prices creep up globally. Also out today is construction spending: -0.2% E MoM v -0.7% prior.
Europe: Ireland’s bank stress tests yesterday showed its four largest banks are in need of €24B in capital. The government has created a restructuring plan which involves a combining two of the lenders together. Along with €46.3B already injected into the Irish financial sector and €30B spent on banks’ property loans, the Irish financial sector has cost an amount that is about two-thirds of the Irish economy. Portuguese financing remains at unsustainable levels with its latest auction of €1.645B in 2Y bonds at 5.793% v 3.519% prior with b/c at 1.4x v 2.3x. Yesterday, the country’s president announced snap elections for June 5 and it appears that the temporary government in place until then cannot authorize a bailout. Portugal will hold another auction today for €1.5B in 1Y bonds. Euro zone February unemployment reached 9.9% v 10.0% prior (revised up from 9.9%), reaching a fourteen month low. Final PMI manufacturing data for March also out today for much of Europe, starting off with the Euro zone at 57.5 v 57.7E and 57.7 prior. PMI Manufacturing numbers mostly missed expectations with 56.2 v 58.0 E in Italy, 55.4 v 56.6 E in France, 60.9 v 60.9 E in Germany, and 57.1 v 60.9 E in the U.K.
Asia: Chinese PMI in manufacturing rose to 53.4 v 52.2 prior. A PBoC official yesterday recommended doubling the reserve requirement ratio up to 100bps as an anti-inflationary measure. Indonesia saw inflation increase 6.65% YoY v 6.99%E, up from 6.84% prior, with core inflation picking up 4.45% YoY v 4.36% prior. Indonesia also saw exports rise 28.9% YoY in February v a revised up 26.0% prior. Thai inflation also picked up with CPI growing 3.14% YoY v 3.10%E. Thailand’s foreign reserves held approximately steady to $181.5B v $182.1B prior, and its holdings of forward contracts increased to $20.8B v $20.0B prior. Indian exports grew 49.7% YoY in February v 32.4% prior and imports grew 21.2% v 13.1% prior. Vehicle sales in Japan dropped sharply in March, down 37.0% v -14.0% prior, as the earthquake hurt an already struggling market. The Tankan manufacturing index out yesterday showed an improving manufacturing sector in Japan just before March’s earthquake and tsunami.