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Futures Pushed Higher On Weaker Yen, But All Could Change With Today's "Most Important Ever" Jobs Number

Tyler Durden's picture





 

The latest "most important payrolls day of all time" day is finally upon us. Of course, this is a ridiculous statement: considering that the average December seasonal adjustment to the actual, unadjusted number is 824K jobs, it will once again be up to the BLS' Arima X 13 goal-seeking, seasonal adjusting software to determine whether the momentum ignition algos send stocks soaring or plunging, especially since the difference between up and down could be as small as 30K jobs. As Deutsche Bank explains: " today's number is probably one where anything above +200k (net of revisions) will lead to a further dip in risk as taper fears intensify and anything less than say +170k will probably see a decent relief rally after a tricky week for markets. Indeed yesterday saw the S&P500 (-0.43%) down for a fifth day - extending a sequence last seen in September." And then consider that nearly 30 times that difference comes from seasonal adjustments and it becomes clear why "farcial" is a far better definition of labor Friday.

Overnight futures are largely higher following news out of Japan that the Chairman of a government-appointed panel Ito said that the GPIF should raise Japanese stock holdings to 18% now and needs to start selling bonds. Ito added that the GPIF should reduce domestic bond holdings to 52%, reduce local bonds to as little as 35% and that Japan's government will enact the panel's advice on GPIF changes. This same regurgitated headline (recall that the GPIF was brought in as a wildcard in early summer and has done precisely nothing to rebalance its holdings since then) has pushed the USDJPY higher and as a result futures have been dragged along. However, should NFP come with a 2-handle, any and all overnight gain will promptly disappear.

Apart from payrolls data, personal income and spending and the University of Michigan’s consumer confidence data are also worth highlighting. The Fed’s Plosser and Evans will also be speaking.

Overnight news bulletin from Bloomberg and RanSquawk:

  • In European trade, stocks are seen mainly higher across the board following outperformance in the Oil & Gas sector.
  • Chairman of government-appointed panel Ito said that the GPIF should raise Japanese stock holdings to 18% now and needs to start selling bonds to the BOJ.
    • Japanese bonds tumbled after the statement
  • Treasuries steady before report forecast to show U.S. economy added 185k jobs in November while unemployment rate fell to 7.2% from 7.3%; ADP Wednesday topped forecasts, 215k vs 170k median estimate.
  • 10Y yield at highest since Sept., 2/10 at widest since July 2011; markets have been focused on signs of economic strength that may prompt Fed to taper asset  purchases sooner than currently expected
  • “Now is the right time to sell, while the BOJ is buying,” Ito said in an interview
  • China’s broadest economic reforms since the 1990s will add less than half a percentage point to annual growth this decade, a survey showed, underscoring the likelihood of a cut in the nation’s expansion target
  • German factory orders fell more 2.2% in October, more than forecast
  • U.K. house prices rose for a 10th month in November as the supply of properties for sale failed to keep pace with demand, Halifax said
  • Sovereign yields mostly higher. EU peripheral spreads widen. Asian stocks gain, Nikkei +0.3%, European stocks and  U.S. equity index futures higher. WTI crude little changed, copper and gold gain

US event calendar:

  • Non-farm payrolls change, cons 185k; unemployment rate, cons 7.2% (8:30)
  • Personal income, cons 0.3% (8:30)
  • Personal spending, cons 0.2% (8:30)
  • Univ. of Michigan confidence, cons 76.0 (9:55)
  • Fed's Plosser (10:15), Evans (15:00)

Market Re-Cap

In European trade, stocks are seen mainly higher across the board following outperformance in the Oil & Gas sector following positive broker recommendations for Total and BP. In terms of indicie specific commentary there is weakness in the periphery with the IBEX 35 and FTSE MIB being the underperformers, with Banca Monte dei Paschi shares seen down over 3% following increased concerns of a possible capital hike. Whilst in Spain there are no standout underperformers, however, banks and basic materials are leading the way down for the index. From an FX perspective, USD/JPY moved higher after being supported by touted importer buying and GPIF reform recommendations. CHF has seen strength across the board, being supported by this morning's CPI release for Switzerland which came in higher than expected (+0.1% vs Exp. -0.1% Y/Y). In term of fixed income, T-notes, Bunds and gilts trade relatively unchanged ahead of key risk events today which include US Nonfarm Payrolls (Exp. +185k) and Unemployment Rate (+7.2%).

Asian Headlines

Chairman of government-appointed panel Ito said that the GPIF should raise Japanese stock holdings to 18% now and needs to start selling bonds. Ito added that the GPIF should reduce domestic bond holdings to 52%, reduce local bonds to as little as 35% and that Japan's government will enact the panel's advice on GPIF
changes.

Japan's Abe has called for a summit with China to ease tensions .

Credit Suisse 12-month target for Hang Seng index set at 27,000.

EU & UK Headlines

German finance minister Schaeuble will hold a secret meeting on Friday with EU colleagues in Berlin to discuss disagreements over proposed procedures for winding down of failing banks.Separately, he said that interest rates are too low for Germany over the long term.

Bundesbank raises German economic growth outlook for 2013-2014
- Forecasts 2014 GDP growth of 1.7% vs 1.5 previously.
- Forecasts 2014 inflation of 1.3% from 1.5% previously.
- Leaves 2013 inflation forecast unchanged at 1.6%.
- Say 2013 GDP to increase no more than 0.5%.
- Says German economy has 'picked up momentum again'.

In terms of ECB commentary this morning ECB's Coeure says ECB lowered rates with sole purpose of ensuring mediumterm price stability and the ECB understands implication of low interest rates. Whilst ECB's Nowotny said Euro Zone inflation expectations stable and there is no need for immediate action. Furthermore, Nowotny said they are looking at examples like BoE's funding for lending. Finally, ECB's Praet says there are no signs pointing at a deflation.

UK Halifax House Prices (Nov) M/M 1.1% vs Exp. 0.8% (Prev. 0.7%, Rev. 1.3%)
- UK Halifax House Price 3Mth/Year 7.7% vs Exp. 7.3% (Prev. 6.9%)

EU, IMF officials will return to Athens December 11th according unidentified sources in Kathimerini

S&P affirmed Switzerland at AAA; outlook stable.

Moody's said UK's improved macroeconomic prospects are credit positive, and ongoing fiscal challenges continue to be reflected in Aa1 rating with stable outlook.

US Headlines

Janet Yellen vote will take place by December 20th according to a senate aide adding that vote in senate possible next week.

Equities

Stocks in Europe are seen broadly higher, with oil & gas sector outperforming after Total (+1%) was added to HSBC's Europe Super 10 Portfolio list, while BP (+0.97%) was added to most preferred oils list at Bank of America. Also of note, shares of London listed Berkeley Group surged 10% after the company said that its full-year results will be at the top end of the range of expectations as it is ahead of schedule on one of its larger developments. At the same time, Givaudan shares are down 4% in early trade following reports that Nestle has launched a sale of its entire 10% stake in Swiss fragrance and flavour maker Givaudan worth CHF 1.145bln. Also, TNT Express shares are down 5% after PostNL said it would sell a 15% stake in TNT Express worth EUR 540mln through a private placement.

FX

Broad based JPY weakness following reports overnight citing chairman of government-appointed panel Ito who said that the GPIF should raise Japanese stock holdings to 18% now and needs to start selling bonds saw EUR/JPY advance to test Dec 3rd high of 140.03 and USD/JPY rallied back above 102.00 level. Elsewhere, GBP/USD outperformed EUR/USD this morning, supported by the release of better than expected UK related housing data, as well as touted GBP buying by ME name.

Commodities

Citigroup say the US is moving toward a significant amount of domestic oversupply of light crude, with the glut on the Gulf Coast likely to grow.

HSBC raises Brent price forecast to USD 100/B from USD 90/B for 2014.

Goldman says commodity downside risks grow and forecasts 'significant' drop in copper, gold, softs.

Commerzbank says next year we expect an average platinum price of USD 1,475 per troy ounce and an average palladium price of USD 760 per troy ounce.

 

DB's Jim Reid concludes the overnight recap

Today's the day we've all been waiting for over the past few months and one that will dictate the mood and the fear factor across the globe over the next year. Yes there will be trepidation as 31 countries nervously wait to see whether they get a nightmare World Cup draw today in Brazil and have England in their group. Good luck if you're one of the 32 lucky countries involved in the draw. I'd be interested to know how many of those countries are represented by the readership to the EMR so I'm looking for a reply from someone in as many countries as possible out of the 32. A two-word reply with your location and your prediction of the winners would be great and I'll collate the answers for Monday. If I get a reply from Honduras, the Ivory Coast, Columbia, Ecuador, Uruguay (from Luis Suarez would be nice), Ghana, Algeria, Cameroon, Iran, Costa Rica or Bosnia-Hercegovinia I'll be particularly chuffed. My estimate is there are readers from 21 out of the 32 countries.

In other more minor news we have another payrolls Friday today. It’s tempting to say how important it is but we always seem to say that even though we know there's an element of randomness to the monthly numbers which are often heavily revised. Nevertheless this number IS very important as it will help form a lot of market opinions ahead of the FOMC in just under two weeks. It may even be the swing factor for the Fed. DB is forecasting a +185k headline gain (same as consensus) in non-farm payrolls (+190k private, consensus +190k) as well as 50k in net upward revisions. With the revisions, this forecast would leave the three-month rate of change at around +202k. Unemployment is expected to dip 0.1% to 7.2%. Such a report would leave it very hard to rule out the December taper. Our base case is that they won't taper but it’s a closer call than we thought it would be a few weeks back.

Personally I think today's number is probably one where anything above +200k (net of revisions) will lead to a further dip in risk as taper fears intensify and anything less than say +170k will probably see a decent relief rally after a tricky week for markets. Indeed yesterday saw the S&P500 (-0.43%) down for a fifth day - extending a sequence last seen in September. Treasuries settled at 2.87%, or +4bp, which is the highest it’s been since mid-September, and getting closer to the 2.99% year-to-date peak recorded in early September. EM credit reversed some of their recent underperformance yesterday with solid performances in the JPM EM bond index (-4bp) and the CDX EM index (-6bp).

In credit, Bloomberg reported that the issuance of dollar-denominated corporate bonds has notched a record for the second straight year. USD-denominated corporate issuance topped last year’s record of $1.47trillion, with a few days of issuance left before the primary calendar shuts down for the year. The risk-off in equities was encouraged by a strong claims number (298k vs 320k expected) and stronger GDP revisions (3.6% vs 3.1% expected and 2.8% first estimate). There was some ambiguity in the data as Thanksgiving may be distorting the former and inventory build may force a Q4 payback in the latter. However for now the headline prints dominated. The sentiment in equities wasn’t helped by what was judged to be a more hawkish-than-expected press conference from Draghi. While the ECB’s non-action on rates was broadly expected, Draghi also seemed to describe a Governing Council that was happy in stating that deflation will be avoided, and reiterating that an array of monetary policy tools remain at the ECB’s disposal should the outlook prove otherwise. Draghi had some interesting words to say about further LTROs, commenting that “If we do operations similar to LTRO, we want to make sure this is being used for the economy. And we want to make sure that this operation is not going to be used for subsidizing capital formation by the banking system under these carry trade operations”. This seems to suggest that the hurdle for any future LTROs will be raised, or that the provision of additional liquidity to banks would have to undergo some form of re-design. The reaction to the comments saw European rates rise with German bund yields reaching their highest level in seven weeks. Periphery rates underperformed, which some attributed to Draghi’s reference about not wanting to subsidise bank carry trades. Despite the strength of yesterday’s US GDP and jobless claims data, EURUSD still managed a 0.5% increase on the day. In terms of ECB staff forecasts, growth estimates for 2014 were raised to 1.1% (from 1.0%) and 2014 inflation was revised lower to 1.1% (from  1.3%).

After the US close we saw the somber news that Nelson Mandela had passed away after succumbing to complications from his recent illness. He was probably the most famous man on the planet and one that shaped the world like few others have done in history.

Turning to overnight markets, Asian equities are ending the week with a cautious tone with most bourses following US equities lower this morning. Losses are being paced by the Hang Seng (-0.1%) and ASX200 (-0.25%). Japanese equities are outperforming today (Nikkei +0.3%) helped by the 0.3% jump in USDJPY. Asian FX and fixed income markets are trading with a similarly subdued tone, with Asian rates rising by around 3-4bp in general - this includes JGBs where yields have touched multi-month highs. Bloomberg is reporting that the head of a Japanese government advisory group is advising that Japan's Government Pension fund GPIF should "start selling bonds now.....while the BoJ is buying". He said that the GPIF should reduce its allocation to bonds to the lower limit of 52% while raising stock holdings to the upper limit of 18%.

Something to watch for over the weekend are congressional negotiations in the US aimed at agreeing on a budget before a self-imposed December 13th deadline. Reuters reports that the Senate Budget Committee Chairwoman Patty Murray and House of Representatives Budget Committee Chairman Paul Ryan are putting on the final touches to a two year budget deal that would avoid a shutdown in January and suspend some spending sequesters. There were also some conciliatory remarks from House Speaker John Boehner yesterday who said he would consider an extension of federal unemployment benefits as part of a bipartisan deal. In Europe, there are reports that Germany’s Schaeuble has organised a meeting with the ECB’s Asmussen, EU Financial Services Commission Barnier, the Eurogroup’s Dijsselbloem and French FM Moscovici in Berlin today to discuss differences over bank resolution measures (Handelsblatt, Bloomberg). The report does not cite a source.

Looking at the day ahead, German factory orders for October and French trade will the main data releases in Europe. The ECB’s Asmussen and Nowotny will be speaking later today which will be followed by the Fed’s Plosser and Evans later in the day. Apart from payrolls data, personal income and spending and the University of Michigan’s consumer confidence data are also worth highlighting. But all eyes will be on November payrolls and then of course the world cup draw later. Good luck to you in both.

 


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Fri, 12/06/2013 - 08:11 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Bout ready to pull those job numbers out of their ass......anytime now.

 

I'm not going to predict what it's going to be.....I just hope it's somewhat believable.

Fri, 12/06/2013 - 08:33 | Link to Comment Obchelli
Obchelli's picture

Here is my predictiion from last evening:

"Tomorrow Numbers will be inline or missing exuberant expectation after ADP beat and today's number and unemployment will tick up which will give Fed cover to Not Taper in December. Futures will already be up by 70-80 points by NFP number. And will rally more afterwards. If there is a huge beat like 250K market will rally anyways with CNBC salivating as how great things actualy are and there is no bubble manana..."

 

So far Furures up 69

Fri, 12/06/2013 - 08:09 | Link to Comment Iam Yue2
Iam Yue2's picture

Scripting by Russell Napier.

Fri, 12/06/2013 - 08:11 | Link to Comment alien-IQ
alien-IQ's picture

Here's a China story worth mention:

Shaking the Bitcoin Believers

So much for China’s willingness to tolerate financial innovation. Regulators have barred the country’s banks from trading Bitcoin, while denying the pseudo-money legal status and cracking down on anonymous users. Though China has stopped short of an outright ban, the move dashes hopes the country might allow start-up currencies to exist alongside the official renminbi.

China’s crackdown is by far the most decisive by the world’s financial regulators to date. That’s probably because enthusiasm for Bitcoin appears to have been greater there than in any other single country. Data from online exchanges suggests that China has in recent weeks accounted for around a third of global trading volume. For a while, Chinese Bitcoin buyers were also paying a significantly higher price for their virtual stash than users outside the Middle Kingdom.

Though China has not made Bitcoin illegal, the directive from the People’s Bank of China severely limits its potential uses.

Full Story here:
http://dealbook.nytimes.com/2013/12/05/shaking-the-bitcoin-believers/

Fri, 12/06/2013 - 08:19 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

First I've heard of that.

 

Fri, 12/06/2013 - 08:29 | Link to Comment alien-IQ
alien-IQ's picture

Yeah it seems like only the good news about bitcoin makes it on to the headlines of ZH. Not unlike how CNBC loves to tout the headline numbers but rarely digs below the surface. Go figure....

On a long enough timeline...everyones biases are exposed.

Fri, 12/06/2013 - 08:17 | Link to Comment Debugas
Debugas's picture

for how long will we have bad news to be good and good news to be bad ?

Fri, 12/06/2013 - 08:20 | Link to Comment firstdivision
firstdivision's picture

Mom and pop that just bought 1000 shares of FB at its peak better be praying for a terrible jobs number.  If we get a good number (which is pretty much certain), the taper trades will hit hard. 

Fri, 12/06/2013 - 08:21 | Link to Comment esum
esum's picture

210-230.... 

Fri, 12/06/2013 - 08:25 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

I've lost count of how many times the latest jobs report was termed "the most important ever".

Fri, 12/06/2013 - 08:28 | Link to Comment negative rates
negative rates's picture

Once a day in the morning is enough for him.

Fri, 12/06/2013 - 08:39 | Link to Comment stant
stant's picture

lets see winterstorm, already slow xmas sales.= a fantastic jobs# and even better online sales, that is all carry on

Fri, 12/06/2013 - 08:54 | Link to Comment El Hosel
El Hosel's picture

If its "That" important it will surely be a Goldiloks blowout number... Just right, not too hot, no too cold. Stocks will love the number, no doubt.

I am Watching Bloomberg on mute... Is that Maxine Waters or James Brown?

Fri, 12/06/2013 - 08:48 | Link to Comment ISEEIT
ISEEIT's picture

Looking for a miss and the resulting euphoria. Why? I've got know f'ing idea.

Fri, 12/06/2013 - 08:52 | Link to Comment Silverhog
Silverhog's picture

My wife was shopping at Macy's in our local mall yesterday afternoon. She was able to park right by the door. Sales clerk told her it's very slow. Even with their big Friends & Family sale there is no one in the store. It was kind of cloudy, so maybe that was it. 

Fri, 12/06/2013 - 08:57 | Link to Comment El Hosel
El Hosel's picture

... Yeah, you definitley don't want clouds when your inside shopping at Macy's, better to save them for a rainy day.

Fri, 12/06/2013 - 08:56 | Link to Comment El Hosel
El Hosel's picture

Here Comes Santa

Fri, 12/06/2013 - 09:14 | Link to Comment thismarketisrigged
thismarketisrigged's picture

i think they tell the truth today and report the real horrible number, because the 10 year can not hit 3 percent and stocks can not go red going into weekend, and they need to wipe away all the losses from this week to continue the weekly winning streak.

 

also, we all know the fed cant taper, so it will feel good fo rthem to actually report the real number today and show how bad the economy is so they continue to have an exuse to pump

Fri, 12/06/2013 - 09:22 | Link to Comment TheRideNeverEnds
TheRideNeverEnds's picture

doesn't matter what the number is, we are going higher, sharply higher.

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