It has been another day of twists, turns and reversals creating trading opportunities for bulls and bears as Friday’s big events approach.
European markets have been particularly active throughout the day across bonds, currencies and indices. EUR had a shooting star bearish reversal, rallying in the morning then being pounded back as the day progesssed. On the flip side, bonds rebounded after starting the day with a selloff. Indices were lower across the board with the FTSE
, MIB and IBEX all falling over 1%.
Greece remains fully in the spotlight with progress toward a deal apparently taking a step backward today. While leaders continue to negotiate in the press seemingly and contradict themselves, the lack of progress became apparent when Greece asked the IMF to bundle its obligations for June into one big payment on June 30th. Up until then, Greece had been expected to make its Friday payment, even IMF President Lagarde who indicated as much just a few hours before the change. This move keeps Greece front and centre and buys a bit more time to make a deal. June 30 now looms as deadline day for Greece with its IMF bundled payment due and the expiry of its bailout program. At the time of writing, reports are circulating about a late night call between Greece PM Tsipras with Germany’s Merkel and France’s Hollande.
US markets followed their European counterparts lower at a similar pace today after the IMF cut its US growth forecast and asked the Fed to hold off on raising interest rates until next year. Considering how smashingly well the IMF’s advice to Greece has gone the last several years, one has to wonder how seriously this unsolicited opinion may be taken.
USD has been climbing through the day suggesting that traders may be expecting a strong jobs report and for the Fed to ignore the IMF and remain on course for raising interest rates this year. Even if the US economy did slow, the optics of an interest rate liftoff delay to 2016 would now look really poor as Americans don’t take well to international organizations telling them what to do.
US traders remain fixated on tomorrow’s nonfarm payrolls report. The street is expecting a 225K increase but I am actually thinking a bit more may be possible since jobless claims have remained low through the month of May. My guess is 240K and a 10K upward revision to the previous month.
Canada’s employment report is also due Friday morning. The oil price has rebounded in recent months at a faster pace than the loonie so Canada’s economy may continue to benefit from the lower dollar. Last month full time jobs rose by 47K so they could retrench a bit but the headline number could rise as it was depressed last month by a drop in part time jobs. For Canada I’m thinking a 25K increase which is above the 10K street estimate.
Crude oil has been selling off through the day as well. Natural gas managed to shrug off a higher than expected storage build as energy traders remain focused on tomorrow’s OPEC meeting and reports that with the cartel winning its supplier war against the US, that production cuts are highly unlikely.
Today’s Asia Pacific session may see markets pulled in different directions between follow-through from Thursday’s events and positioning ahead of all the big news coming right through to the weekend. AUD has stabilized following yesterday’s selloff and could be active on today’s construction PMI report, but the S&P/ASX has been following its overseas counterparts downward.
There have been no major corporate announcements after the US close today.
Significant announcements released overnight include:
Bank of England decision no changes to interest rate or QE as expected
Brazil interest rate 0.50% increase to 13.75% as expected
IMF cut 2015 US GDP growth forecast to 2.5% from 2.1%, asked Fed to hold off raising interest rates to first half of 2016
US jobless claims 276K vs street 278K
US natural gas storage 132 BCF vs street 118 BCF
Canada Ivey PMI 62.3 vs street 55.0 vs previous 58.2
France Q1 umemployment rate 10.3% vs street 10.4%
France Q1 unemploymnt chng (38K) vs street 8K
Greece unemployment rate 25.6% vs street 25.2%
UK Halifax house prices 8.6% vs street 8.5%
Upcoming significant announcements include:
TBA OPEC meeting
9:30 am AEST Australia construction PMI previous 47.0
3:00 pm AEST Japan leading indicator street 107.2
7:00 am BST Germany factory orders street (0.6%)
9:00 am BST Norway industrial production previous 2.3%
9:30 am BST UK 1-yr inflation expectation previous 1.9%
8:30 am EDT US nonfarm payrolls street 225k
8:30 am EDT US nonfarm payrolls revision previous 223K revised to
8:30 am EDT US private payrolls street 220K
8:30 am EDT US unemployment rate street 5.4%
8:30 am EDT US average hourly earnings street 2.2%
8:30 am EDT US participation rate previous 62.8%
8:30 am EDT Canada jobs change street 10K vs previous 19K
8:30 am EDT Canada full-time jobs street (10K) vs previous 47K
8:30 am EDT Canada part-time jobs street 40K vs previous (66K)
8:30 am EDT Canada unemployment rate street 6.8%
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