Sept 7. Payrolls – focus on wages

–Employment report this morning with NFP expected 193k, rate of 3.8% and yoy average hourly earnings +2.7%.  From the NY Fed’s Williams yesterday (BBG): “The fact that wages haven’t grown a lot faster is a sign that this economy still has room to run,” he said, adding that as a result, “we don’t feel the need to raise interest rates more quickly than otherwise.”  Another article noted that Williams appears to have shifted to a slightly more dovish stance, downplaying inflation concerns in his comments.  Little reaction in the market though 5/30 treasury spread edged to a slight new high at 30.7 bps.  Overall, yields fell 2-3 bps yesterday with tens -2.3 to  287.7.

–Big tech as represented by the NYFang index is coming under increasing pressure, posting a low of 2723 yesterday.  Previous lows of 2707 (July 31) and 2731 (Aug 20) make this area appear technically important.
–It was in February that China took over the Anbang group, and chatter of funding stress related to another acquisition-happy conglomerate, HNA, was rampant.  HNA Group is now set to shed its stake in Deutsche Bank under pressure from Beijing.  HNA is the largest shareholder of DB.  In the beginning of the year DB was around 15-16 EUR, now just under 10 with a low of 8.75 set in June.  Just a reminder that China continues to address domestic financial risks (which have perhaps been accentuated due to the weaker yuan) while Europe contends with weak banking stocks.
–I saw a survey from BMO that suggests a slightly bullish tilt to this morning’s employment data, but it’s worth noting that next week’s 3/10/30 year auctions are set to raise $49 billion in new cash.  Supply hasn’t proven to much of an issue for the market, but will likely cap the upside over the short term.
Posted on September 7, 2018 at 5:17 am by alexmanzara · Permalink
In: Eurodollar Options

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