G3 Recap 11-05-10

Main Items:

  • Very positive US jobs report:
  1. Private Payrolls +159k vs 80k expected, with an additional +40k in revisions.
  2. UE unchanged at 9.6% as expected
  3. Hourly Earnings steady at 1.7% YoY vs 1.6% expected. Avg Weekly Hours rose to 34.3 vs 34.2 expected and previously.
  4. Note, however, that unlike in past months, state and local government payrolls did not register much of a change at all. Whether this is a temporary phenomenon or not remains to be seen, but does increase the possibility of seasonal distortions.


  • BoJ kept policy unchanged
  • UK Core PPI Output continued to rise, up 0.4% MoM in Oct vs 0.2% expected.
  • Canadian Employment rose 3k in Oct vs 15k expected and -6.6k previously. The UE rate fell to 7.9% from 8% as the participation rate fell.


  • The equities reaction to jobs report was pretty muted, but one has to acknowledge the overbought conditions after yesterday’s move. Payrolls can set off changes in the intermediate trend (like in May!) but this report doesn’t suggest anything of the sort. Still, a pause here is probably in order.
    The PIGS continued to weaken today. The London clearing house LCH Clearnet has told members that they may have to deposit more cash in order to trade Irish sovereign debt. This and momentum overrode news that Ireland is targeting a 2/3rd reduction in its 30% budget deficit.

    Bunds can rally on this, but a replay of 1Q, where global risk assets sold off on PIGS fears, may not occur until we get a headline event. The risk is also arguably smaller given that many of the mechanisms set up by the EU and ECB for Greece can now also be used for Ireland.

  • So the foreign backlash kicked into high gear. No doubt the responses were prepared well in advance. China, Brazil, Germany, and some other EM countries have criticized the Fed. It’s not about monetary policy of course, since other countries can have no say in domestic US policy. It’s about the drop in the dollar. To quote former US Treasury secretary John Connally: the US Dollar is “is our currency, but your problem.”