Today's nonfarm payroll number is set to be a virtual non-event: with consensus expecting an abysmal print, it is almost assured that the real seasonally adjusted number (and keep in mind that the average February seasonal adjustment to the actual number is 1.5 million "jobs" higher) will be a major beat to expectations, which will crash the "harsh weather" narrative but who cares. Alternatively, if the number is truly horrendous, no problem there either: just blame it on the cold February... because after all what are seasonal adjustments for? Either way, whatever the number, the algos will send stocks higher - that much is given in a blow off top bubble market in which any news is an excuse to buy more. So while everyone is focused on the NFP placeholder, the real key event that nobody is paying attention to took place in China, where overnight China’s Shanghai Chaori Solar defaulted on bond interest payments, failing to repay CNY 89.9mln (USD 14.7mln), as had been reported here extensively previously. This marked the first domestic corporate bond default in the country's history - indicating a further shift toward responsibility and focus on moral hazard in China.
So much for the weather. As we warned earlier today, when we said that with everyone expecting a miserable print the only possible result would be a large "beat", sure enough that's precisely what happened. Breaking it down:
February payrolls: +175K, Exp. 149K, Last revised from 113K to 129K).
Unemployment rate: 6.7%, Exp. 6.6%, Last 6.6%.
Labor participation rate: 63.0%, Last 63.0%
Today's consensus estimate for the non-farm payroll is for a 149K increase broken down as follows among some select banks:
- Bank of America 115K
- Deutsche Bank 120K
- Goldman Sachs 125K
- Citigroup 135K
Why is the expectation so low? Why cold weather of course - the same cold weather that supposedly impacted December and January data. Then again, one wonders just what is the seasonal adjustment factor for if not to adjust for the, gasp, seasons. So when one puts the February actual number in the context of its average adjustment over the past decade, what does one get? Simple - a boost of 1.5 million "jobs" which exsit nowhere in the real world but in some Arima-X-13 spreadsheet.
It appears Obama's latest "one hour" conversation with Putin has just made things downshift from bad to worse. Moments ago Russia accused the European Union of taking an "extremely unconstructive position" by freezing talks on easing visa barriers that complicate travel between Russia and the EU over Ukraine. "Russia will not accept the language of sanctions and threats" and will retaliate if sanctions are imposed, the Russian Foreign Ministry said in a statement about agreements reached at an emergency EU summit on Thursday. And assuring that the imminent Crimean referendum due in just over a week will rapidly deteriorate the current detente was overnight news that Russia's upper house of parliament will support Crimea in its bid to join the Russian Federation, the speaker of the upper house of parliament said Friday. "If the people of Crimea decide to join Russia in the referendum, we, as the upper house, will certainly support this decision," Valentina Matvienko said at a meeting with Vladimir Konstantinov, his counterpart in the Crimean parliament.
- Putin rebuffs Obama as Ukraine crisis escalates (Reuters)
- Behind the $100 Billion Commodity Empire That Few Know (BBG)
- Initial Public Offerings Hit Pace Not Seen in Years (WSJ)
- Russian Parliament Will Back Crimea Split From Ukraine (WSJ)
- Nakamoto Named as Bitcoin Father Denies Involvement, Flees Press (BBG)
- Chaori Can’t Make Payment in China’s First Onshore Default (BBG)
- Zombies Spreading Shows Chaori Default Just Start (BBG)
- Pimco's Gross declares El-Erian is 'trying to undermine me' (Reuters)
- U.S. Fighters Circle Baltics as Putin Fans Fear of Russia (BBG)
The biggest Asia-Pacific defense story this week is China’s decision to increase its defense budget by 12.2 percent to about $132 billion for the next fiscal year. Notice that the figure is noticeably uncorrelated with China’s 7.7 percent actual growth rate (with a 7.5 percent target rate). The numbers are expected, of course, and send a clear signal across the region that China is taking its investments in military hardware seriously. Contrast the Chinese trend with the United States’ belt-tightening on defense spending. The United States and China are, of course, nowhere near to a convergence in defense spending.
Obama did it by offering hope, change, and free stuff for all... Abe did it by printing inordinate amounts of money, pumping stocks up, and speaking in increasngly militarist tones... and now Vladimir Putin has managed to get his approval rating to near-record highs - by invading Ukraine?
A week after Obama held his first crisis photo op holding a phone while supposedly talking to Putin, he has followed up with another, hour-long conversation. Below is the official White House statement on what was said.