- US Payrolls printed just 103k vs 150k expected, with a +32k revision for Nov. Private payrolls increased 113k vs 178k expected. Government employment ex-Federal dropped 20k. UE dropped big to 9.4% vs 9.7% expected and 9.8% previously, due to a big -260k drop in the labor force, but also a big 297k gain in employment. , taking the participation rate down to 64.3%.
- Bernanke’s testimony didn’t reveal much new info. He did say that it could take 4-5 years for the job market to normalize, which would be consistent with expected average job growth in the 200k range.
- Canadian Employment rose 22k in Dec vs 20k expected and 15.2k previously on the back of strong growth in full time employment. The UE rate was unchanged at 7.6% vs 7.7% expected.
- Italian UE rose to 8.7% in Nov vs 8.6% expected and previously
- Taiwan Banks Cut Foreigners’ Deposit Rate to 0%, EDN Says
- Agricultural Bank of China and China Minsheng Banking are both planning to tap the markets, as China’s banking sector prepares to meet stricter capital rules – WSJ.
- So the ADP print was a mirage. This suggests that the consensus view of a slow recovery can continue to be consensus. The large output gap suggests that the belly of the curve should be able to continue its rally after the selloff of last month. Furthermore, 5yr yields printed a lower weekly high and low for the first time since early November. This also suggests that a countertrend move is likely in the next couple weeks.
- Gold recovered from an$18 drop to close roughly unchanged on the day. Interestingly, there appears to be a surge of ETF buying in late December that has not translated into higher prices:
It’s quite possible that the increase in real yields has acted as a headwind for gold prices over the past couple months, just as it did 1H2010. (The chart below regresses US real yields vs the log price of gold) If so, a treasury rally may be a positive catalyst.