This page has been archived and commenting is disabled.

Previewing Today's ADP Report

Tyler Durden's picture




 

Today's otherwise key news event - the ECB rate announcement (which just printed at unchanged as expected) and press conference, will be trivial. As such, everyone is set to ignore the latest update from Mario Draghi, who courtesy of a $1.3 trillion liquidity injection since December has now largely wasted all his liquidity dry powder, at least until Spanish and Italian bonds are trading back at 7%, some time in the next few months. The result is that people like Citi's Steven Englander are saying to ignore the ECB, and to focus solely on the ADP (which has a horrendous predictive track record of the actual NFP print) report, to be released at 8:15 am, as it may be the only tradable hint ahead of the NFP report which as noted before is coming out on Friday, which is an equity holiday, although futures and bonds will be trading at the time of the release. More importantly, since the Fed now responds to economic data points in real time, a big miss to the consensus print of 206K will likely set the market surging as it will mean the Fed doves are back in control. Paradoxically, a meat or big beat, will be very market negative, as it will justify the withdrawal of liquidity support for at least 3-4 months, when the election fight will be in full swing, and Obama would be quite happy for another boost to the S&P in advance of November, and the repeat of the debt ceiling fiasco.

From Steven Englander:

Yesterday’s post-Minutes price action was impressive. FX investors essentially exited all positions, taking a narrow interpretation of the FOMC commentary. Given how dated the march FOMC meeting now appears, we would emphasize how readily incoming data could overturn yesterday’s market reaction. The FOMC did not signal that additional stimulus was imminent but there was a clear indication that it would be forthcoming if the economy weakened and that approach is consistent with Fed Chairman Bernanke’s speeches last week.

The ADP consensus is 206k.  Out of 37 forecasts only four are above 230k and four below 185k.

So the outcomes:

  1. ADP < 185k – complete unwind of the Minutes impact on FX. Investors would see the US economy edging into the slowdown that Bernanke hinted at, and a stronger case for more stimulus. The initial impact might be for the USD to strengthen on the risk-off view, but it seems likely that the prospect of further stimulus would be positive for asset markets and that there would be some risk buying once the knee-jerk reaction was done.  In the first instance JPY could move to the upside, AUD, CAD and EUR on the downside, but we think these could be reversed as FX investors re-engage with the possibility of further stimulus.
  2. ADP falls between 185k and 230k – in the range of expectations – probably not strong enough to keep full scale USD buying continuing but not a clear signal for a reversal either.  Muted reaction, with investors looking to see if there are any ECB surprises.
  3. ADP >230k – this would take us back to the 2005/06 range of outcomes and would be viewed as a s signal that the US recovery was for real. The Minutes would be re-scrutinized and the possibility of early Fed exit would be certainly be discussed in markets. Possibly very USD bullish because if the yesterday’s combination of higher US rates and fear of higher discount factors lead to a continuation of asset markets sell-offs.  Despite yesterday’s reaction, JPY looks vulnerable on this, but positions that are a) long and b) sensitive to higher rates would also be in pain.

Our economists are leaning to a softer payrolls outcome than the market, so we may be a leaning a little to the left on this one. Either way, in FX we would not underestimate the degree to which yesterday’s outcomes could be reversed or augmented by incoming data.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 04/04/2012 - 07:57 | 2315782 slaughterer
slaughterer's picture

Daddy, why is the stock market plunging?  Because things are too good.  

Wed, 04/04/2012 - 08:03 | 2315795 Robslob
Robslob's picture

Thats funny !

Wed, 04/04/2012 - 08:04 | 2315798 slaughterer
slaughterer's picture

Seriously, here is where the ADP's statistically proven bias upwards will be the trigger for a major market plunge.  I cannot believe everything is hanging on the most unreliable data point of the week.  

Wed, 04/04/2012 - 08:15 | 2315824 maxmad
maxmad's picture

+209,000    BS!!!

Wed, 04/04/2012 - 08:19 | 2315829 maxmad
maxmad's picture

didnt realize McDonalds hired that many each month..

Wed, 04/04/2012 - 08:25 | 2315851 JPM Hater001
JPM Hater001's picture

There was such a mental resistence to 13200...and based on opening PM opening today I think there may be some resistence at 13000 today too.

Wed, 07/25/2012 - 05:11 | 2648262 mediaprizm
mediaprizm's picture

Very entertaining subject, I will bookmark your website to check out if you publish more in the future. Personal Trainer Wimbledon | Personal Trainer Clapham

Wed, 04/04/2012 - 08:22 | 2315843 AldousHuxley
AldousHuxley's picture

old bowl worth more than million hours of hard human labor:

 

http://blogs.wsj.com/scene/2012/04/04/song-era-bowl-fetches-26-7-million/

Wed, 04/04/2012 - 08:16 | 2315826 AldousHuxley
AldousHuxley's picture

 

 

http://www.texastribune.org/library/data/government-employee-salaries/th...

Name     Department     Title     Salary
Mack Brown     Intercollegiate Athletics     Head Coach     $5,166,667
Richard D Barnes     Intercollegiate Athletics     Head Coach     $2,206,945
Gail Ann Goestenkors     Intercollegiate Athletics     Head Coach     $1,060,000
August E Garrido Jr     Intercollegiate Athletics     Head Coach     $900,000
Darrell D Dodds     Intercollegiate Athletics     Athletic Director     $705,269
William C Powers Jr     OFFICE OF THE PRESIDENT     President     $613,612
Thomas W Gilligan     RED MCCOMBS SCHOOL OF BUSINESS     Dean     $537,500
Steven Weinberg     DEPARTMENT OF PHYSICS     Professor     $531,008
Gregory L Davis     Intercollegiate Athletics     Special Assistant     $456,584
Daniel Johnston     SECTION OF NEUROBIOLOGY     Professor     $453,333
Bjorn Engquist     DEPARTMENT OF MATHEMATICS     Professor     $437,066
Major L Applewhite     Intercollegiate Athletics     Assistant Coach     $409,836
Manuel A Diaz     Intercollegiate Athletics     Assistant Coach     $394,205
Bryan D Harsin     Intercollegiate Athletics     Assistant Coach     $391,924

Wed, 04/04/2012 - 08:08 | 2315805 poor fella
poor fella's picture

Bernanke has turned into an Incan astronomer - pompously strutting around with utter confidence that if 10,000 slaves (savers) are sacrificed each night, the sun will rise again. He's been correct so far - so no policy change.

Wed, 04/04/2012 - 09:23 | 2316020 cnhedge
cnhedge's picture

adp report may not be a good indicator anymore.

http://www.cnhedge.com/

Wed, 04/04/2012 - 09:27 | 2316030 Saro
Saro's picture

Good Number:  Evidence of recovery. Bullish!

Bad Number:  Increases likelyhood of printing.  Bullish!

About the only way they could fail is by meeting consensus . . .

Mon, 09/03/2012 - 04:11 | 2757231 bestlucklyzgt
bestlucklyzgt's picture

All of these Burberry Outlet are 100% mirrored the genuine ones.Now, baggage out of Burberry Outlet go along with lizard, ostrich plus crocodile dermis sometimes during a reasonably Burberry Outlet priced amount. Dolce plus Gabbana fake purses and Burberry Outlet will be excellent to observe and get fine casino wars that is going to enable the particular owner without difficulty tackle all these purses and Burberry Sale in no time. A duplicated baggage out of Burberry Sale will be just what exactly would probably provide the timeless style and design if you wish so that you can clutch plus fantastic superb Burberry Sale . Many who seem to like great fretting Burberry Sale would love any fake travelling bag out of Burberry Outlet Online .Every details including material, hardware, lining, leather trimming, structure and chrominance are cautiously imitated based on the Burberry Outlet Online .There are various kinds of replica Burberry Outlet Online with diverse styles and colors Burberry Outlet Online in the market. Whatever kind Louis Vuitton Outlet you are looking for, you can certainly find Michael Kors Outlet that can perfectly fit you. Louis Vuitton Outlet are fast becoming popular because despite being stylish and made of quality materials, Michael Kors Outlet are affordable to a high percentage of middle income earners.

Do NOT follow this link or you will be banned from the site!