Commentary:
Payrolls were inline, which means that today’s price moves may give us an indication of where the path of least resistance is. A generalized observation may be that carry trades are still under significant pressure. White Euribors were off ~3bps today. This could mean that rates products in the higher rated EM countries may continue to be sold as well, with a concurrent effect on FX. Note also that Gold suffered its worst sell off since April 15th and silver closed at a new low. FTAV notes that the latest data from fund flow specialists EPFR suggest $12.5bn was pulled from bond funds globally last week — the highest dollar value of net redemptions in the 12-year history of the data series.
Notable:
- Payrolls increased by 175k vs 163k exp and 165k prev. Unemployment ticked higher to 7.6% vs 7.5% exp and prev, as the participation rate rose to 63.4% vs 63.3%.
- Hourly earnings were flat MoM vs 0.2% exp and prev. Weekly Hours increased to 34.5 as exp vs 34.4 prev
- WSJ’s Hilsengrath: Federal Reserve officials are likely to signal at their June policy meeting that they’re on track to begin pulling back their $85-billion-a-month bond-buying program later this year, as long as the economy doesn’t disappoint.
- Canada Employment jumped 95k last month vs 15k exp and 12.5k prev. This took the Unemployment rate down to 7.1% vs 7.2% exp and prev. This was despite the fact that the participation rate jumped to 66.7 vs 66.5 exp and prev
- German IP rose 1.0% YoY in April vs -0.7% exp and -2.5% prev.
- Standard & Poor’s revises its outlook on long-term ratings for Brazil’s sovereign debt to negative from stable.
- Japan Headlines:
- Japan’s finance minister Taro Aso was asked about intervention in the yen. “I am watching it, but I have no intention to intervene or take action immediately just because of that.”
- Economy minister Akira Amari: “Markets have been moving sharply lately due to external factors, but I believe volatility will decrease as the government implements growth strategy measures swiftly.”
- PM Abe said “I don’t want to comment on market movements.”
- The Government Pension Investment Fund in Japan said that it will increase the weighting of foreign bonds in its portfolio to 11% from 8% and of foreign stocks from 9% to 12%. It will also increase its holdings of domestic stocks from 11% to 12%. It decreases its holdings of JPY bonds to 60% from 67%. The net increase in foreign holdings comes to around USD 70bn.
Turkey – Erdogan stays defiant as he returns from a trip to North Africa; he accused financial speculators of trying to weaken his country and economy – Bloomberg
Upcoming Data:
- Mon: China Trade Balance, CPI, IP, Money Supply, Japan Trade Balance, Eco Watchers Outlook Survey, Australia Home Loans, NAB Business Confidence
- Tue: BoJ, UK IP,
- Wed: UK Claimant Count Rate, Canada Housing Starts, AU Employment
