NFP +192,000, Below Expectations Of 196,000, Below Whisper Of 250,000; Unemployment Rate 8.9%, Unchanged Average Hourly EarningsSubmitted by Tyler Durden on 03/04/2011 09:30 -0400
Total NFP increases in February: +192,000, slightly below expectations of 196,000, and below the Goldman target of 200,000. January revised from 36K to 63K. Private Payrolls increased by 222K on expectations of 200K from 68K, manufacturing jobs increased by 33K from 25K, down from a 53K revised in February. From the report: "Nonfarm payroll employment increased by 192,000 in February, and the unemployment rate was little changed at 8.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in manufacturing, construction, professional and business services, health care, and transportation and warehousing." Average hourly earnings unchanged, and average weekly hours declined to 34.2 from 34.3.
- Fed Policy Makers Signal Abrupt End Bond Purchases June (Bloomberg)
- China's Exchanges Plan to Double Exchange-Traded Funds (Bloomberg)
- China Defense Budget to Stir Regional Disquiet (Reuters)
- Banks Face More Loan Write-Downs (WSJ)
- Honesty for Banks Is Still Such a Lonely Word (Bloomberg)
- Salgado Favors Easing Greek Bailout Terms as EU Wrangles Accord (Bloomberg)
- Foxconn to move China jobs inland (FT)
- Merkel Risks Clash Over Irish Bailout in Euro Rescue Push (Bloomberg)
- IEA: Libya Unrest Starting to Hit Oil Supplies (WSJ)
From Bank of America's Guy Moszkowski, who confirms our views that continuing subdued market participation (or as Guy calls it "market engagement") remains subdued, arguably due to the Bernanke Put which means stock market volatility is a thing of the past, at least until days in which war appears imminent: "Downgrading Citi and GS to Neutral. POs cut. Common denominator: expected weakness in Q1:11 results. Results unlikely to be dismal, and should show improvement over Q4, but we don’t expect seasonal improvement as strong as often seen in the past. Client engagement remains subdued, Mid-East turmoil likely only to further reduce customer risk appetite. Thus we are making significant cuts to our forecasts, and expect consensus to decline over the coming weeks. Increasingly, we believe investors will look to the theme of improving cash flow/return of capital via dividends/ buybacks, and also to play financials that are less–or even positively – affected by restrictions on banks such as Volcker Rules." - BofA/ML
We were about an hour early with our prediction on when the Libyan violence newsflow will pick up. The headlines are coming now. Reuters reports that Libyan forces use tear-gas to disperse anti-Gaddafi protest in Tripoli, gun fire heard. Look for oil to drift higher with stocks now completely oblivious as the ES-Crude correlation factors have been deactivated virtually everywhere.
"This NFP will not influence Bernanke as it is not about data now, it is about funding the deficit and thus more spending from Obama will need more bond purchases by Bernanke as they have to take up the slack as foreign buyers continue to diversify and few seem to see this. The Feds balance sheet is ringing alarm bells to me and M2 is exploding higher. How is it that the Fed is allowed to be the biggest holder of US debt? Who authorises this extremely dangerous situation and how does he get out of it? Printing more Dollars I guess. Good Lord the Dollar is in deep, long-term trouble in my book as history confirms that printing money ends in disaster. ALWAYS. ZIRP will continue to see money evade paper assets and look for stores of value and commodities will continue to rise until Bernanke changes his stance but I am afraid he is trapped in a “Catch 22” situation now. US real wages are falling fast and the US needs the consumer spending now to get the recovery going. That is not going to happen." Strategic Alpha
Markets up overall on the heels of optimistic labor market news in the U.S., with Europe still positive despite the ECB’s announcement of likely future rate hikes. Former Fed Chair Alan Greenspan made a statement yesterday that the fiscal stimulus, new financial regulations, and other ‘activism’ is hampering the U.S.’s recovery, contrasting sharply with current Fed Chair Ben Bernanke’s QE2-defending Humphrey Hawkins speech to Congress this week. Yesterday’s payrolls numbers taken into context with other recent data suggest that today’s payroll figures should easily top their 200KE. Expectations are for the unemployment rate itself to rise to 9.1%, a number that we would consider a victory. Recall that the prior rate dropped mainly on workers leaving the labor pool. A re-entry into the labor pool usually occurs when workers feel the economic environment gives them a good chance for finding a job. So a retracement in the unemployment number for that reason is a positive by our reckoning. The front end has sold off on yesterday’s excitement. While we believe the ECB might well be set to move, we think the Fed will hand-sit for a while and the selloff should be faded. On a production standpoint, factory orders for January are likely to rise given preliminary releases of expanding U.S. manufacturing with consensus estimates at a 2.0% increase from +0.2% prior.
Gallup Reports Underemployment Surges To 19.9%, February "Jobs Situation Deteriorates": As Bad As 2010Submitted by Tyler Durden on 03/03/2011 18:38 -0400
On one hand we have the Department of Truth about to tell tomorrow that NFP based on various seasonal and birth death adjustments increased by 250,000. On the other hand, we have Gallup which actually does real time polling without a procyclical propaganda bias. And Gallup does't have any good news: "Unemployment, as measured by Gallup without seasonal adjustment, hit 10.3% in February -- up from 9.8% at the end of January. The U.S. unemployment rate is now essentially the same as the 10.4% at the end of February 2010." And the one indicator that nobody in the mainstream media will touch with a ten foot pole: "Underemployment, a measure that combines part-time workers wanting full-time work with those who are unemployed, surged in February to 19.9%. This resulted from the combination of a sharp 0.5-point increase since the end of January in the percentage unemployed and a 0.5-point increase in the percentage working part time but wanting full-time work. Underemployment is now higher than it was at this point a year ago (19.7%)."
The February report on nonfarm payrolls should look much better than its predecessor. Goldman expects a gain of 200,000 jobs, with risks skewed to a bigger increase. The two key issues are 1) the underlying trend in payroll growth—we think it’s at least 150,000 and perhaps stronger, 2) the extent of the weather-related “payback” in the report—most likely in the neighborhood of 50,000 or a bit more. Markets clearly expect a strong outcome. The “consensus” forecast for nonfarm payrolls has moved up considerably over the past week and is now just below our own. Yesterday’s price action suggests that market participants have positioned for a strong release. If the number is even a modest disappointment, expect a substantial sell off, especially with Libyan violence escalating again.
WTI Back Over $102 As Rebel Council Chief Vows "Victory Or Death", Foreign Journalist Moves In Libya Restricted Ahead Of ClashesSubmitted by Tyler Durden on 03/04/2011 08:18 -0400
It seems the ridiculous Chavez intervention meme is now dead and buried, and WTI is promptly back over $102 following a statement from the head of Libya's rebel National Libyan Council opposing the rule of Muammar Gaddafi who on Friday vowed: "Victory or death." "We are people who fight, we don't surrender. Victory or death. We will not stop till we liberate all this country ... The time of hypocrisy is over," ex-justice minister Mustafa Abdel Jalil told cheering crowds in Al Badiya. "Libya is free and Gaddafi must go", the crowds chanted. Elsewhere in Tripoli, residents expected protests after opponents of Libyan leader Muammar Gaddafi prepared to march in the capital after prayers on Friday and they were expecting government forces to respond with a violent crackdown. "We do not have any weapons. We will go to the mosque and then say Gaddafi should leave," said Mohammed, a resident in the Tripoli district of Tajoura where clashes took place last week. "They (pro-Gaddafi militias) will attack." That is likely, which also means that the US, courtesy of a rapidly approaching aircraft carrier, will proceed with previously cleared military evacuations, anticipating a provocation of their own, which would then be used a pretext for an all out invasion. "Several residents of Tripoli have said they are planning to protest against Gaddafi when they leave their mosques after Friday prayers, at about 1300 GMT." Which is 8 am Eastern, meaning that the newsflow of an escalation in crackdown and death will begin some time after the NFP announcement.
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 04/03/11
A month ago we reported that the state of Virginia has established a subcommittee to study alternatives in the case of a terminal "Fed" breakdown, and would propose gold as a sound alternative to the existing fiat currency. Now, the state of Utah has gone a step further and is actually voting, as early as today, on whether to recognize gold and silver coins, issued by the federal government, as legal currency, a move that would send a huge signal to the Marriner Eccles building that Americans have had enough of the Fed's dollar debasement. "The coins would not replace the current paper currency but would be used and accepted voluntarily as an alternative." Reports Foxnews: "The legislation, which has 12 co-sponsors, would let Utahans pay their taxes with gold and also calls for a committee to study alternative currencies for the state. It would also exempt the sale of gold from the state capital gains tax. The bill cleared a state legislative committee on Wednesday, the first of 11 similar bills in statehouses across the country to do so. If the bill clears the House, it would have to pass the Senate before the governor could sign it into law." Paying taxes in gold? Interesting. We certainly hope this was not highlighted due to being the only viable use of funds, as one would question the legitimacy of the entire proposal. Finally: "Attorney and Tea Party activist Larry Hilton, author of the original bill, said he doesn't foresee any roadblocks." We shall see about that, but in the meantime it is worth highlighting that the onslaught against the dollar is coming not only from China which as we reported yesterday is pushing to convert the renminbi to a global reserve currency, but from within, as more and more states realize that the viability of the dollar is now crippled, thanks to the Chairprinter.
All you need to know about how the market reacts to Non-Farm Payroll day in one convenient cheat sheet. Despite a gross cumulative surprise of 3,480,000 (jobs below expectations), and an average surprise of -27,000, coupled with a negative bias (0.53% negative surprise, 0.33% positive surprise), the market tends to have a bullish average return on payroll days of 0.14% (0.07% median) compared to 0.03% average on all other days. In other words, even if there is a miss tomorrow, which is highly unlikely, expect the market to "internalize" the news and come up with some completely idiotic explanation which excuses yet another stock ramp, which will only be avoided if nuclear war breaks out (and even then it is a toss up).
That the bankrupt US is living on borrowed time between various can kicking episodes is by now not news to anyone. Neither is it news that as long as the broader population finds brief distractions, such as the latest iPad app or the occasional Charlie Sheen scandal, which keep them busy in peak advertising hours, few if any will care about the sordid details of the unsustainable big picture. This ongoing apathy is starting to get to some market commentators most notably Paul Farrell of MarketWatch who summarizes events in the past 2 years as follows: " Admit it, we lost the opportunity. Jail a bank CEO and Wall Street will miraculously reform? You’re joking, right? Wall Street got away with a “legal” bank heist. Today the should-be/would-be inmates are running the prison. Wall Street’s corrupt banks have lost their moral compass … their insatiable greed has become a deadly virus destroying its host nation … their campaign billions buy senate votes, stop regulators’ actions, manipulate presidential decisions. Wall Street money controls voters, runs America, both parties. Yes, Wall Street is bankrupting America." But nobody cares. So what would make America care? Here are the four time-bombs which Farrell believes will be sufficient to blow up Wall Street.
Fed Balance Sheet Hits New Record At $2.55 Trillion As Bank Reserves Hit $1.3 Trillion All Time HighSubmitted by Tyler Durden on 03/03/2011 18:28 -0400
The Fed's insatiable desire to redo all the debt monetization mistakes of the Weimar republic continues. This week, the Fed's balance sheet hit a fresh all time high of $2.55 trillion, primarily as a function of increasing Treasury holdings. Not adding today's $7.2 billion POMO to the total holdings, the Fed's total Treasury holdings increased by $22.8 billion W/W, even as MBS posted their first decline in two weeks now that repurchases have materially slowed down as mortgage rates are substantially higher than at the start of QE Lite. This means that net of today's monetization, the Fed owns 7.2% more Treasurys than even the adjusted Chinese holdings of $1.16 trillion. Another key observation: excess reserves which have surged in recent weeks due to the unwind of the SFP program and due to the delay in liability catch up with Fed assets, increased by another $6 billion to a record $1,296 billion. And, naturally, only a hedge fund as big as the Fed would list $116.1 billion in other assets.