Category: Future Trading News

The excellent US January jobs report out Friday heightened expectations that the Fed will have the confidence to raise interest rates later this year, even as the rest of the world grapples with weakening economies and spiraling crises. US short-term interest rates jumped after the jobs data while the ten-year US Treasury yield rose nearly 30 bps to 1.94% from 1.65%. The US Dollar surged while precious metals slid lower as rates popped up. Europe spent much of the week convulsed by the Greek crisis and distracted by diplomatic maneuvering surrounding the Ukraine conflict. As the Greek government began talking details of a new financial plan with European officials, the ECB cut Athens off from its cheapest available funding for its struggling banks. The PBoC’s delivered its first Reserve Requirement Ratio cut since May 2012 after China’s January manufacturing PMI contracted for the first time in two years and non-manufacturing PMI hit a one-year low. The Shanghai Composite saw its second week of losses, while for the week the DJIA gained 3.8%, the S&P500 added 3% and the Nasdaq rose 2.4%.

Every aspect of the US January jobs report telegraphed strength. The headline nonfarm payrolls widely beat expectations at +257K v +228Ke while the November nonfarm reading was revised to 423K from 353Ke. The unemployment rate rose to 5.7% from 5.6% as one million additional people decided to start looking for work in an improved environment. Wage growth saw its strongest rise since November 2008 (helped in part by over 20 states enacting minimum wage hikes that went into effect in January). The labor force participation rate rose to 62.9% from a nearly four-decade low of 62.7% prior, while the number of people who changed status from “not in the labor force” to employed saw the biggest jump ever.

Greek Finance Minister Varoufakis went on the road this week to press his case for a new Greece deal in European capitals. He got little sympathy, with nearly every single EU partner demanding that Greece stick to its prior agreements through an extension of the current bailout program. The ECB sent a clear signal midweek by refusing to accept any more Greek government bonds as collateral for loans, forcing Athens to use the ELA facility for short-term liquidity, at a cost of 1.5% compared to 0.005% for the repo facility. The decision effectively grants the ECB the ability to turn off the country’s funding on short notice and increases the pressure on the Greeks to cut a deal before the Feb 28th deadline when the current program expires. EUR/USD came into the week below 1.1290, shot as high as 1.1530 on Tuesday, then fell back to around 1.1300 to close out the week.

Continue reading “Futures Levels & Economic Reports 2.10.2015”