TradeTheNews.com Weekly Market Update: Markets Absorb Strong NFP Report and Calmer ECB
Fri, 10 Mar 2017 16:13 PM EST
The stock market advance saw a respite this week as legislators in Washington began what is going to be the arduous process of passing healthcare reform. Rising bond yields caught investors' attention testing some key levels. The February jobs data remained robust, surpassing expectations on the payrolls, while suggesting the tightening labor market is starting to translate into upward pressure on wages. The ECB signaled that it is no longer worried about deflation and raised both its inflation and GDP forecasts for this year and next. A growing number of market participants were emboldened in their calls that central banks are falling behind the curve on removing accommodation. By Friday, futures markets were pricing in at least three hikes from the Fed this year, and some analyst were pulling forward their timetable for beginning to shrink the Fed's balance sheet. WTI crude prices careened back through the $50 mark after US crude stockpiles showed another outsized jump. Many pointed to technical/seasonal selling pressures, but nonetheless a 9% weekly decline weighed on stock sentiment. Gold prices fell back below the 200-day moving average to test $1200. For the week, the DJIA fell 0.5%, the S&P500 dropped 0.4%, and the Nasdaq lost 0.2%.
Bonds continued to decline throughout the week, potentially hurt by a deluge of corporate issuance accompanying rising rate expectations. The 10-year Treasury note yield went from 2.49% on Monday to reach a week-high 2.61%. Bonds rallied slightly after NFP data as the market had been hoping for even stronger numbers in the wake of the blowout ADP jobs data on Wednesday. Bund prices sold off late in the week following slightly more constructive commentary from Draghi and a source report noting some ECB officials had requested a discussion on whether rates can rise before QE ends. The German 10-year yield rose 7bps, reaching 0.495%, before prices recovered some ground on Friday.
Investors looking for economic policy implementation had little reward as the White House started the messy process of engaging with Congress to repeal and replace Obamacare. The bill has been passed by two committees in Congress, but faces opposition from conservative groups, heathcare providers, the AARP, and Democrats. Trump also continued to work on deregulation of the financial sector, meeting with small banks and their associations. The administration is looking at ways to ease the burden on community banks and reinstate an updated Glass-Steagall Act.
In corporate news this week, airline names weakened after some carriers lowered guidance. Delta cut its op margin and passenger unit revenue outlook on Monday, noting higher costs. Southwest revised its RASM guidance lower, citing unexpected softness in close-in demand in the back half of February. Caterpillar came under pressure after the US government made accusations of tax and accounting fraud following a raid on its offices last week. On Friday, the company confirmed that the IRS is challenging its 2007-2012 taxes, but that Caterpillar stands by its financial reporting.
SUNDAY 3/5
(CN) CHINA NATIONAL PEOPLE'S CONGRESS (NPC) SETS 2017 GDP TARGET of "around 6.5% or higher if possible" vs 6.5-7.0% in 2016
MONDAY 3/6
DAL Adjusts Q1 PRASM flat to 1% (prior flat to +2% y/y) ; Affirms capacity flat to down 1%; Narrows CASM +5.5-6.5% y/y (prior 5-7%) ; Trims Op margin 10-11%(prior 11-13%)
(US) JAN FINAL DURABLE GOODS ORDERS: 2.0% V 1.0%E; DURABLES EX-TRANSPORTATION : 0.0% V +0.1%E
CRM IBM and Salesforce announce global strategic partnership centered on artificial intelligence
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50% (AS EXPECTED)
TUESDAY 3/7
(CN) CHINA FEB FOREIGN RESERVES: $3.005T V $2.965TE (1st monthly rise since June)
*(EU) EURO ZONE Q4 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.7% V 1.7%E
(UK) HOUSE OF LORDS VOTES ON BREXIT BILL: PM MAY GOVT WINS VOTE; reject amendment to Brexit bill (votes down calls for second referendum)
(US) Atlanta Fed cuts Q1 GDP forecast to 1.3% from 1.8% on 3/1
(UK) HOUSE OF LORDS VOTES IN FAVOR OF ADDING EXTRA CONDITIONS TO BREXIT BILL (loss for PM May govt); calls for a binding vote on the final Brexit agreement with Europe
(JP) JAPAN Q4 FINAL GDP Q/Q: 0.3% V 0.4%E; ANNUALIZED GDP: 1.2% V 1.5%E
(CN) CHINA FEB TRADE BALANCE (CNY-TERMS): -60.4B V +172.5BE; First deficit since Feb 2014
WEDNESDAY 3/8
DPW.DE Reports Q4 Net €841M v €670M y/y, EBIT €1.11B v €1.13Be, Rev €15.4B v €15.4B y/y
(CN) CHINA FEB TRADE BALANCE (USD TERMS): -$9.2B V +$27.0BE (1st deficit since Feb 2014)
CAT: US government makes accusation of tax, accounting fraud
(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
(US) FEB ADP EMPLOYMENT CHANGE: +298K V +187KE
(US) Q4 FINAL NONFARM PRODUCTIVITY: 1.3% V 1.5%E; LABOR COSTS: 1.7% V 1.6%E
(US) Atlanta Fed cuts Q1 GDP forecast to 1.2% from 1.3% on 3/7
NVDA NVIDIA and Microsoft boost AI cloud computing with launch of industry-standard Hyperscale GPU accelerator
THURSDAY 3/9
(US) Association of American Railroads weekly rail traffic report for week ending March 4th: 521.6K carloads and intermodal units, +1.8% y/y (eighth straight week of gains)
(CN) CHINA FEB CPI M/M: -0.2% (first decline in 4 months, biggest decline in 9 months) V +1.0% PRIOR; Y/Y: 0.8% (2-year low) V 1.7%E
(CN) CHINA FEB PPI Y/Y: 7.8% V 7.7%E; 6th consecutive and biggest increase since Sept 2008
FRIDAY 3/10
(UK) JAN INDUSTRIAL PRODUCTION M/M: -0.4% V -0.5%E; Y/Y: 3.2% V 3.2%E
(US) FEB UNEMPLOYMENT RATE: 4.7% V 4.7%E
(US) FEB AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.3%E; Y/Y: 2.8% V 2.8%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E
(US) FEB CHANGE IN NONFARM PAYROLLS: +235K V +200KE
(CA) CANADA FEB NET CHANGE IN EMPLOYMENT: +15.3K V -5.0KE; UNEMPLOYMENT RATE: 6.6% V 6.8%E
(EU) ECB reportedly has discussed whether rates can rise before QE ends - press
(US) New York Fed Nowcast: raises Q1 GDP forecast to 3.2% from 3.1% on 3/3; raises Q2 GDP forecast to 3.0% from 2.9%
