G3 Recap 12-03-10

Main Items:

  • Payrolls rose 39k last month vs 150k expected. There was widespread weakness in private sectors, especially in retail trade, education and health, ‘other’ services, as well as in the government sectors. The UE rate jumped to 9.8% from 9.6% previously. The participation rate was unchanged.
  • US hourly earnings also disappointed, unchanged in Nov vs a 0.2% increase expected.
  • US Non Manufacturing ISM improved to 55 in Nov vs 54.8 expected and 54.3 previously.
  • Canadian Employment rose 15.2k in Nov vs 19.8k expected and 3k previously. This, along with 30bp fall in the participation rate dropped the UE rate to 7.6% vs 7.9% expected and previously.
  • S&P has placed Greece’s BB+ sovereign rating on CreditWatch Negative and will resolve it within three months, after seeing the European Stability Mechanism Plan. Probably not a huge deal given that it is already no longer investment grade.

Overseas:

  • Chinese non Manufacturing PMI fell to 53.2 in Nov vs 60.5 previously. The HSBC measure also fell to 53.1 vs 56.4 previously
  • Italian PMI Services improved to 54.5 in Nov vs 51.4 expected and 51 previously
  • UK PMI Services declined to 53 in Nov vs 53.2 expected and previously
  • EU retail Sales rose 1.8% YoY in Oct vs 1.0% expected.
  • Australian Services Index fell to 46.2 from 50.7
  • Brazil hiked reserve requirements, capital requirements for household credit operations. A BCB hike is expected next week.

Commentary:

  • The payrolls print was ugly, but the price action was great. This reflects both positioning as well as the fact that other data points do not completely corroborate the print today. In fact, one could argue that the print is actual positive for equities, given that it delays Fed hikes and makes the Bush tax cut extension more likely. The positive price action in fact should increase confidence in pro risk positions into year end.
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