Positive noises from Greece reinforces bullish mood

Yesterday’s market action

“The slowest gains since January 2013”- this was the headline which followed a release of Non-Farm Payrolls posting a build of 126,000 jobs in the month of March. This abysmal number follows downward revisions to the January and February numbers by 35,000 jobs each. The fall in the headline figure led to a large drop in the S&P, sparked by a quasi-risk-off play. We also saw T-notes break to new highs on the day but this is more likely to be a pricing in of lower yield for the foreseeable future on the back of sustained low interest rates. We saw slowdowns across the sectors as the Retail sector slowed from 32,000 jobs in February to only 26,000 in March. Leisure and hospitality slowed from 70,000 in February to only 13,000 in March. The weather was once again plugged as the main cause for the sharp drop. Soc-Gen has reported that the weather shortfall was only worth 41,000 of the 182,000, based on the March weather average of 141,000 jobs. This “weather” reasoning seems to hold less water each time as we saw that hiring in construction, which posted gains of 35,000 in both January and February, fell by 1000. As the bad weather subsided, fewer employees were required to repair homes and buildings damaged by the cataclysm of a North-West American winter. A positive to take from the Jobs report on Friday was the wage-inflation numbers; on the month we saw a gain of 0.3% and on the year a gain of 2.1%. This, coupled with the unmoving unemployment rate of 5.5%, has seemingly been the only thing keeping price action above; regularly with such a large disappointment price action would continue lower. Macro-fundamentals however from a monetary policy standpoint are keeping the equity-bears at bay; lower rates for longer have been able to maintain a floor in US stocks and a cap on the dollar weakening phase we saw. We have seen the losses in the dollar pare during Easter Monday’s trading.

Today’s View

This week has seen a shift back to Greece as we had weekend reports that Greece have confirmed they intend to repay the IMF on Thursday. This Euro-focus did not last long as estimate-beating reports from the US posted a Services PMI reading of 59.2, with the employment index beating expectations and the Composite beating the previous number. This morning saw several pieces of data from Europe. Services and Composite PMIs were released; Italy and Germany both beating expectations marginally but a headline miss from Europe as a whole coupled with a fall in the French numbers. This caused an amplified dollar-strength move coupled with European weakness and allowed the EURUSD to make new lows for the session, bottoming out around S2. Ahead today we have US Chainstore sales, US Red book and also US JOLTS jobs openings. Quiet on the US data front we are looking for subdued market activity in favour of the established range-trade entries.