Intraday Market Thoughts Archives

US NFP rose by 227K from an upwardly revised 284K (prior +243K) with the unemployment rate steady at 8.3%. Private payrolls slowed to 233K from an upwardly revised 285K (prior 257K). US dollar rallying on a US-positive growth reaction, boosting US short term yields relative to Eurozone and the UK. As a result, The spread of Eurozone 10 yr yields minus US 10-yields is at -0.23%, the lowest since July 2011.

We warned earlier today: "robust report is likely to trigger an initial rally in risk assets alongside the US currency, before potentially seeing a reversal in risk currencies and assets on eroding chances of an outright QE, at which point the USD would remain the last currency standing". For our Friday Premium Intermarket Trades, USDJPY warnings and Jobless Techs, pls click here: http://www.ashraflaidi.com/products/sub01/access/?a=614 Non subscribers click here: http://www.ashraflaidi.com/products/sub01/

Greek debt restructuring can proceed; ISDA will meet later today; German CPI unrevised and trade surplus rose. UK manufacturing and industrial production declined while PPI input prices rose; Canadian unemployment rate declined. Focus is on NFP and trade balance data from US and Canada.

The USD trades slightly higher against all majors in the ongoing session. European equities are losing about 0.15% and the relative strength loser is NZD.

Greece can proceed with the debt restructuring as 69% of international debt holders and 85.8% of holders subject to a Greek law agreed to the swap deal. The Greek government said it would invoke the collective action clauses to impose the swap on other investors which will bring the participation nearly to 96%. The ISDA will meet today at 1pm GMT to determine if Greek credit event occurred which seems likely considering that the CAC were invoked. The second bailout totaling EUR 130 bln will probably be confirmed and delivered.

Data from Germany revealed that the final February CPI was unrevised at 2.3% y/y and the trade surplus rose in January to EUR 13.1 bln from previous EUR 12.9 bln as exports rebounded strongly.

GBP weakened after annual manufacturing production declined in January to 0.3% from 0.9% and industrial production contracted additional 3.8% from previous -3.1% which is the largest decline since 11/2009. PPI input prices rose in February 2.1% from 0.1% m/m on higher cost of oil suggesting that CPI may not drop as quickly as hoped in the months ahead. EURGBP jumped on the news to 0.8392 but has since lost all its gains.

Canadian employers lost 2.8K jobs in February from January's 2.3K growth. The unemployment rate declined to 7.4% from 7.6%.

The US session will bring the eagerly awaited NFP report at 8:30 am ET. It is expected to print 209K from previous 243K in February while the unemployment rate is seen steady at 8.3%. The ADP was strong and even though the jobless claims rose, the 4 week average declined. However, both ISM manufacturing and ISM non manufacturing showed that the employment sub index declined in February.

The trade deficit is anticipated marginally wider for January at USD 48.9 bln from previous USD 48.8 bln.

Canadian trade data is also due at 8:30 am and the surplus is expected to decline in January to CAD 2 bln from previous CAD 2.7 bln.

GBP volatility could increase at 10:00 am when NIESR releases its UK GDP estimate for February.

Ashraf's CNBC interview earlier this morning, minutes after the PSI Deal http://youtu.be/ZY8DyU_x4uo

The Greek PSI deadline has passed but leaks suggest it has easily surpassed the 66.6% collective action clause threshold and maybe be above the 90% target. The euro was the top performer while the yen lagged as risk assets cheered the news. The ECB and BOC both left rates unchanged. China CPI is due next. Thursday's Premium note is found below.

It was an extremely busy day in the markets. The ECB held rates at 1.00%, as expected but the euro rallied as Draghi revealed ECB forecasts for higher inflation. The euro gave back some of these gains as he blamed oil the change and continued slipping as officials lowered 2012 growth estimates.

Canada also held rates at 1.00% but the Canadian dollar rallied on upbeat comments on the economy and a higher inflation forecast. USD/CAD fell below 0.99 cents.

In the US, initial jobless claims at 362K were worse than the 352K expected but the overwhelming focus was on the PSI deal. The deadline to participate was late in US trading but there was a nearly non-stop trickle of positive indications that propped up broad market sentiment. The official results will be announced at 0600 GMT.

The next question is whether Greece will invoke the collective action clauses on the remainder of bonds. That could happen as soon as Friday with the ISDA likely to trigger CDS shortly after. The only way Greece can avoid this outcome is by paying out 100% on the non-participating bonds something they said they wouldnt do.

China is the focus of the upcoming session. CPI is due at 1:30 am expected at 3.4% y/y. At 0530 GMT, industrial production is expected up 12.5% y/y and retail sales are expected up 17.4% y/y.

Thursdays Premium note is due is found here: http://ashraflaidi.com/products/sub01/access/ ?a=613 NonSubscribers can click here: http://ashraflaidi.com/products/sub01/

Ashraf will be on CNBC Europe on Friday at 6:20 am GMT.

According to Greek websites, the latest on PSI take-up currently stands between 77% and 79%, with rumors of a take-up as high as 90%. The deadline for Greek bondholders to accept the PSI offer on Greek law bonds is Thursday 20:00 GMT. Results are due on Friday at 06:00GMT. UPCOMING TV SLOTS: Ashraf will appear on CNBC ASIA on Thursday at 22:30 GMT, then on CNBC EUROPE/ASIA on Friday 6:20 GMT (20 mins after the PSI official announcement), followed by live on-floor interview with ALARABIYA at 10:15 GMT. For the rest on these cautionary notes and the likely surprises/red flags to watch out for in the next 24 hrs, see today's Premium note http://ashraflaidi.com/products/sub01/access/?a=613

Rumor of 50 bps RRR cut from China; PSI deadline nears and the unofficial participation is 77%; Swiss CPI rose; German industrial production higher. BOE kept rates and QE steady. Market turns to ECB, jobless claims and BOC rate decision. Wednesdays Premium Intermarket Insights chart the latest technical developments in the S&P500 and the VIX, lending credence to the outlooks put forth on Monday.

The greenback trades broadly lower against all majors except JPY. European equities are gaining nearly 2% and the relative strength winner is AUD and CHF.

Market sentiment improved on rumors that China will cut RRR by 50 bps and also by unofficial Greek sources that reported that PSI participation currently stands over 77%. The deadline for PSI participation is today at 20:00 GMT and the official PSI announcement and the possible activation of the CAC will come tomorrow.

On the European data front, Swiss CPI jumped higher to 0.3% in February after January's -0.4% which is the first positive print since last October. However, the annual deflation intensified to -0.9% from -0.8%. German industrial production rose in January 1.6% m/m and 1.8% y/y.

BOE kept the official bank rate steady at 0.5% and did not increase the Asset Purchase Facility which remained at GBP 325 bln.

ECB's rate decision is due at 7:45 am and it is expected to keep rates unchanged at 1%. The main event will be press conference that starts 45 minutes later.

The NY session will start today at 8:30 am ET with ECB press conference and jobless claims that are seen marginally higher at 352K from 351K. The key point of the conference will be the description of conditions under which the ECB would consider announcing LTRO3. Since December, the ECB added over EUR 1 trillion in liquidity.

Canadian housing starts that are due at 8:15 am ET and are expected to rise in February to 199K from 198K are unlikely to cause much reaction as CAD traders will wait for BOC rate decision at 9:00 am. The overnight rate is widely expected to remain at 1% where it has been since September 2010.

A WSJ story said the Fed is considering a round of sterilized MBS purchases. First, this is yet another sign that the Fed will continue to hammer away at lingering US economic weakness. Second, this is one of the first signs that officials are somewhat concerned about inflation. For the FX markets those two factors send opposing signals but it is likely the pro-growth side will win out.

Wednesdays Premium Intermarket Insights chart the latest technical in the S&P500 and the VIX and the potential implications ahead. New trades on EURUSD, USDJPY, gold and oil, as well as existing trades in USDCAD and EURGBO. Direct access to these is found here: http://ashraflaidi.com/products/sub01/access/?a=612 NonSubscribers can click here: http://ashraflaidi.com/products/sub01/

Markets appreciated the improving US growth picture on Wednesday as Greek PSI fears died down after repeated assurances from European leaders. Speculation about sterilized Fed bond buys raises as many questions as it answers. The Canadian dollar was top performer on the day while the yen lagged. Australian employment posts another month of unexpected losses. Wednesdays Premium Intermarket Insights chart the latest technical in the S&P500 and the VIX and the potential implications ahead.

A solid ADP employment report emphasized the upward trajectory of the US employment market and provided a modest lift to risk trades following two days of declines. Private February employment increased 216K, virtually dead on the consensus.

Schauble and Rehn both expressed confidence that the PSI deal will meet the required thresholds, allaying some of yesterdays concerns. Bloomberg also reported that publicly announced commitments to the swap account for 58% of outstanding Greek debt.

With the moment of truth looming, it was also a positive that no signs of panic leaked out of Greece.

A WSJ story said the Fed is considering a round of sterilized MBS purchases. First, this is yet another sign that the Fed will continue to hammer away at lingering US economic weakness. Second, this is one of the first signs that officials are somewhat concerned about inflation. For the FX markets those two factors send opposing signals but it is likely the pro-growth side will win out.

Aussie employment showed more losses in February, losing 15.4K after --14.2K in January, vs expectations of +5K. The unemployment rate held steady at 5.2%.

Earlier in the region, New Zealands central bank held rates at 2.50%, as was widely expected. The New Zealand dollar dropped a half-cent as Bollard said the high NZD has been detrimental and that sustained strength would reduce the need for further cuts.

In Japan, negative economic signals continue to point to long-term malaise. The final reading on nominal Q4 GDP was revised to -0.5% from -0.3%. Real GDP, however, was unrevised at -0.2% because deflation was larger than expected.

Wednesdays Premium Intermarket Insights chart the latest technical in the S&P500 and the VIX and the potential implications ahead. New trades on EURUSD, USDJPY, gold and oil, as well as existing trades in USDCAD and EURGBO. Direct access to these is found here: http://ashraflaidi.com/products/sub01/access/?a=612 NonSubscribers can click here: http://ashraflaidi.com/products/sub01/

Monday's Premium note warned about a repeat of the April 2011 market top, using the anticipated strength in non-farm payrolls as a rationale to the obstacle to further Fed asset purchases. We warned that if Fridays release of US jobs report shows the 3rd consecutive monthly reading of +200K in

non-farm payroll, it would be a repeat of the last three consecutive months of +200K readings seen February- April 2011, a period coincided with the April 2011 peak in equities and oil. Today's 216K rise in February ADP adds to the probability of seeing a +200K ADP reading. See what this means ahead. Latest Premium Intermarket Insights found here: http://ashraflaidi.com/products/sub01/access/?a=612 NonSubscribers can click here: http://ashraflaidi.com/products/sub01/

Ashraf's interview on CNBCArabia (English synopsis below the clip) previewing Friday's PSI deal deadline & Friday's US jobs report. He states the recent improvement in US labour markets may further reduce the case for further asset purchases from the Fed, which may lead to ongoing market correction. Moe here: http://youtu.be/OAeltRjk6uQ

Greece getting closer to PSI deal; Swiss unemployment unchanged; German factory orders dropped. Focus shifts to ADP; Canadian building permits and later to RBNZ rate decision. Ashraf will be on CNBC Arabia at 13:15 GMT, 17:15 Dubai time, explaining the double-edged sword of QE3 expectations & US jobs data.

USD trades little changed since the beginning of the London session. European equities are gaining about 0.3% to 0.7% and the relative strength winners are AUD and NZD.

AUD declined to 1.0509 during the Asian session on the back of slower Q4 GDP growth that declined to 0.4% from 0.8% q/q and to 2.3% from 2.6% y/y. It has since recovered all its losses and currently trades around 1.0580 on reports that China will boost imports of energy and raw materials.

MNI reported that Greece is getting closer to the PSI deal as six largest Greek banks agreed to participate in the debt swap. The participation of some pension funds still remains in question while others already confirmed they will not participate. Greek government expects participation around 75% but rumors that appeared yesterday point to a smaller number. 66.6% participation is required to allow the collective action clauses that would force all bond holders to participate. The bond swap is a precondition for the bailout.

On the data front, Swiss unemployment rate remained steady and in line with expectation at 3.4% in February (3.1% s. a.) and German factory orders dropped 2.7% in January from 1.6% m/m which translates to a 4.9% decline y/y. Foreign orders that dropped 5.5% m/m were the most significant factor behind the fall. Despite the disappointment, EURUSD holds steady around 1.3140.

Germany sold EUR 3.312 bln (EUR 4 bln target) worth of 5 year bond. The average yield declined to 0.79% from 0.91% and cover remained unchanged at 1.8.

The NY session will begin at 8:15 am ET with ADP report which is seen higher in February at 204K from previous 170K.

Canadian building permits are due at 8:30 am and are seen lower in January at -3.1% from previous 11.1%.

Later in the session at 3 pm RBNZ will announce their cash rate decision and provide a statement. It is widely expected that rates will remain unchanged at 2.5%.

Monday's LATEST PREMIUM INTERMARKET TRADES include existing trades on USDCAD, EURGBP and gold w/ charts on US jobs figures & intermarket dynamics here: http://ashraflaidi.com/products/sub01/access/?a=611 Nonsubscribers can click here: http://ashraflaidi.com/products/sub01/

Patik Urban

The market sensed desperation in a last-minute threat from Greek officials on Tuesday, sending risk assets sharply lower. The Australian dollar was the worst performer while the yen surged. The Asia-Pacific region is mostly quiet Wednesday with Australia GDP as the lone highlight. Monday's LATEST PREMIUM INTERMARKET TRADES include existing trades on USDCAD, EURGBP and gold w/ charts on US jobs figures

Officials from Greeces finance ministry issued a statement saying it does not contemplate paying out PSI holdouts and affirming that it will invoke the collective action clause if participation is not high enough.

Rumors grew that the swap may not even reach the 66.6% threshold after four Greek state pension funds said they would not participate, including the police. Such still appears to be remote but would be catastrophic. Officials also denied rumors that the deadline would be extended beyond 2000 GMT on Thursday.

There is growing uncertainty about how holdouts will be treated if Greece gets more than 85% participation. There is some sense that Greece could honor the new debt for PSI participants while defaulting on the rest.

International creditors are also in focus with 14% of debt outstanding written under foreign laws and not subject to the PSI. A group in Switzerland represented by lawyers from Bingham McCutchen hinted that it is prepared for a legal fight.

In the background, concerns about slowing growth in China and the risks surrounding Fridays non-farm payrolls encouraged risk averse traders to get out of the way. The S&P 500 fell 1.5% in its worst day of 2012.

Australian GDP will be released at 0030 GMT. The consensus is for 0.8% q/q growth but the market may be priced for a tick or two lower. Look to details on investment and consumer spending for signs on what the RBA will do next.

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EURSD drops below its January trendline support, now nearing the 55 dma of 1.3070s. RBA keeps rates unchanged; IIF estimates damage from Greek default at EUR 1 trillion; UK Halifax declines; second reading Q4 Eurozone GDP unrevised; ECB deposits at fresh record high. No data from the US as the country gears up for "Super Tuesday". Canada Ivery PMI next.

EURSD drops below its January trendline support, now nearing the 55 dma of 1.3070s, which coincides with the 1.3050s--50% retracement of the rally from the January low. The greenback is stronger against all majors with the exception of JPY. European equity indices are losing about 1% and the relative strength winner is JPY while NZD lags.

Commodity dollars continue to be under pressure together with gold and other metals on the back of Chinese growth concerns. The pressure increased further on the Aussie after the RBA left rates unchanged in line with expectations. The dovish statement stressed scope for lower rates should demand conditions weaken. In three months time, markets are pricing 27 bps of rate cuts today compared to 23 bps on Monday. AUDUSD trades around 1.0595.

Sentiment worsened today further on report that IIF projects that Greek default would result in liabilities exceeding EUR 1 trillion and required assistance to Portugal, Spain, Italy and Ireland. Earlier reports that Greece would delay PSI decision to 3/14 proved inaccurate and the decision will be made on 3/8.

UK Halifax house price index declined in February 0.5% m/m and 1.9% y/y which is lower than market expected.

Second estimate of Eurozone Q4 GDP was unrevised at -0.3% q/q and 0.7% y/y. However, Eurozone Q4 household consumption dropped 0.4% from previous 0.3% growth.

ECB deposit facility reached a new record high yesterday at EUR 827.5 bln.

The only report that is due during the NY session today is Canadian Ivey PMI that is anticipated lower in February at 62.1 from previous 64.1. The employment sub index declined dramatically in January to 55.2 from December's 60 so today's report may receive more attention than usual as traders will use it to predict Friday's Canadian labor data.

See our LATEST PREMIUM INTERMARKET TRADES w/ charts on US jobs figures & intermarket dynamics here: http://ashraflaidi.com/ products/ sub01/ access/ ?a=611 Nonsubscribers can click here: http://ashraflaidi.com/ products/ sub01/

Continued worries about a slowdown in China remained the overriding theme in US trading but an upbeat ISM non-manufacturing report prompted a modest comeback. On the day, NZD was the laggard with JPY leading. The RBA decision is the highlight of Asia-Pacific trading. Monday night's Premium Trades include a preview for RBA, USDCAD, EURGBP.

The ISM service sector reading improved to 57.3 compared to the 56.0 consensus, however the employment component slipped to 55.7 from 57.4. That is still a high level but limits the probability of an upside surprise in Fridays non-farm payrolls report.

The upside surprise limited the euros decline. After falling to 1.3160 on a series of soft European PMIs, EUR/USD rebounded to 1.3237 in the wake of the ISM data. Afterwards, it was a lackluster session with most pairs trapped in a tight range.

Yen buying was the theme due to the forecasted Chinese slowdown but also due to risks from central banks and non-farm payrolls later in the week. US equities were softer with the S&P 500 falling 0.4% to 1336. USD/JPY hit 81.55 post-ISM and was later range-bound.

The RBA decision will be announced at 0330 GMT and all 24 economists surveyed by Bloomberg are forecasting no change. The market is a tad more constructive with OIS pricing a 14% chance of a surprise rate cut. In the likely event of no change the focus will be comments about the future outlook. Australia yesterday reported a more than 6% fall in q/q corporate profits, suggesting there is the potential for layoffs. If the RBA notes these risks, as well as the chance of a Chinese slowdown, the market may begin to price in cuts before the end of the year.

See our LATEST PREMIUM INTERMARKET TRADES w/ charts on US jobs figures & intermarket dynamics here: http://ashraflaidi.com/products/sub01/access/?a=611 Nonsubscribers can click here: http://ashraflaidi.com/products/sub01/

How long can the dovish FOMC members (led by Bernanke) continue to talk down the data? US February services ISM has hit 12-monh high at 57.3, defying expectations of a decline to 53.2 from 56.0 Markets may have to worry if Fridays release of US jobs report shows the 3rd consecutive monthly reading of +200K in non-farm payrolls? The LAST TIME US NFP PRODUCED 3 CONSECUTIVE MONTHS of +200K readings was in February- April 2011, a period coinciding with the April 2011 peak in equities and energy -- also coinciding with the FINAL MONTHS OF QE2. See our LATEST PREMIUM INTERMARKET TRADES w/ charts on US jobs figures & intermarket dynamics here: http://ashraflaidi.com/products/sub01/access/?a=611 Nonsubscribers can click here: http://ashraflaidi.com/products/sub01/

Swiss retail sales rose; Eurozone retail sales grew m/m but remained unchanged y/y; Eurozone PMI composite and services both revised lower; UK PMI services lower; new highs for ECB deposits. Market turns to factory orders and US ISM non manufacturing. Both AUDUSD Premium longs are filled. See below for more details.

USD is mixed in the ongoing session. It trades stronger against commodity currencies, unchanged against EUR, GBP and CHF and weaker against JPY. European equities are lower by about 1%. The relative strength winner is JPY while CAD and NZD lag.

Commodity currencies are under pressure after China lowered its GDP growth goal to 7.5% from previous 8% suggesting lower exports and therefore lower demand for commodities. Despite the lower target for growth, the inflation target remained at 4%.

Annual Swiss retail sales jumped 4.4% in January from previous 1.7%. EURCHF has been trading within a narrow range since the end of January and it currently trades around 1.2060.

Eurozone retail sales grew 0.3% in January from previous -0.5% m/m and remained unchanged y/y. Significant discounts contributed to the rise but consumer spending is likely to remain under pressure given the rising unemployment and elevated energy and food prices. Furthermore, retail sales in Germany, the biggest Eurozone economy, fell 1.6%.

Other European reports included Eurozone February PMI composite which was revised to 49.3 from initial 49.7 and PMI services which was revised to 48.8 from 49.4. Sentix investor confidence improved slightly to -8.2 from -11.1.

In the UK, PMI services declined to 53.8 from 56 in February and the business expectations component rose to 12 months high. Continued expansion of the dominant sector increases chances that the UK will be able to avoid a recession. EURGBP trades slightly lower at 0.8330.

ECB deposits reached a record high at EUR 820.82 bln on Friday.

The US session will bring January Factory orders that are seen lower at -1.5% from previous 1.1% growth and ISM non manufacturing that is expected to print 53.2 in February, marginally lower than January's 56.

The decline in China's services PMI and Friday's late session downgrade of Greece to C by Moody's triggered our Premium Aussie longs. EURUSD, oil & gold as well as 4 charts on AUDUSD, gold and EURUSD. Direct access to the trades and chart: http://ashraflaidi.com/ products/sub01/access/?a=608 CLICK HERE to Subscribe: http://ashraflaidi.com/products/sub01/