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NEWS 1 Drudge TTN MktWch Reuters FT FXStreet Bloom FX Hub RTT CEP PruBear
NEWS 2 Aljazera AP BBC LAT McClaty Barchart France AgWeb WSJ NYT ANALYSIS MFGR Wright Baum NakedC SMRA Across Fall St Dismal Barrons Forex KR LINKS Archives LiveRes Politics Backup Actives Belly Latest Ratios Bunds GOOGLE News Oil Copper Argtina Aussie Laidi Soybeans BMO PRICES Tsys BL CPMKT RT Yhoo Swaps KRP Financials Footsie Bunds BONDS Briefing USU TYU 5-min 10-min 10Y 2Y/30Y TU/US Bund/TY FOMC STOCKS Briefing DJM8 NKM8 NK/DJM S&P 21D Mktbeat Mkt Data Nikkei USD/FX SpotFX USD Euro Yen Aussie Loonie BL Cur Comments FXCM Barchart OIL GOLD Oil CLN Gold M CRB Copper Lumber Aug Soy GC/CL HG/CG Metals Energy POLITICS Politics Hines RawStory Anti-War Carpet TP Memo TBrush Buchanan LibVal FUN LINKS Biddingtons Art Art Valuation VT Road Trip 12:00 AM
Calendar and Forecasts - - - KR Calendar - - - Wrightson - - - Int'l Calendar - - - Any Date
1000 Pending Home Sales 1100 10Y Note Announcement, re-opening expected 1215 Geithner on the economy 1700 Rosengren (non-voter, but a talker) 1915 Helicopter Ben 7:30 AM
US Capital Market Down -1.31% Today || Down -1.00% in June
CPMKTE -2.95% today || Down -2.39% in June || Down -11.94 from Oct 9 Peak S&P -3.09% to 1360.68 -- and down -2.92% in June || Ugly close below 1371 support DJIA -394.64 pts The Bond Market Index (CPMKTB) is up +0.46% The Bond index is up 0.45% in June; down -1.31 from its March 19 peak. At start of June, Bonds were 29.45% of the entire investment grade capital markets 4:18 PM
Price Movements Over 0.5%
Oil up +8.7% or $11.11 to $138.90 Gold up 3.2% or $28.00 to $899.80 The Oct gold/oil ratio is 6.5, its lowest ever; it was 7.2 on Jun 4 Copper is up +2.5% CRB up +2.5% Euro up +1.1% USD index down -0.9% Euro-Yen up +0.7% 3:59 PM
Bond Index Up +0.46% -- Curve Steeper
The bond market index CPMKTB is up +0.44% this week; off -1.32% from Mar 19 peak 10yr swap rate wider by 2.0bp || Inflationary expectations hotter by 4.0bp 2Y is 2.397%; lower this week by 22.8bp; the recent high is 2.764% The 10Y is 3.936%; lower in yield by 10.6bp this week The 2Y/10Y curve is 153.9bp, steeper this week by 12.2bp; recent narrow is 132.7bp 3:50 PM
CPMKTE -2.73% || S&P -2.85% to 1364.00 || DJIA -377 pts - - - Briefing Commentary
There hasn't been anything today that can seemingly resuscitate the financial sector. It is down 4.1% and on the brink of registering a 20% loss for the year. GCM on Wednesday: If S&P breaks the 1371 support, it can give way into the 1320s at least 3:49 PM
Trade The News - - - TTN
Fed's Bullard: Can remain with current policy until late 2008 - Notes should excercise caution before starting any monetary tightening - But Fed will have to focus on inflation in 2H08 3:45 PM
Dollar Weaker, Euro Soars Almost 2 cts
Dollar index is 72.360, down -68 pips; May/Jun range is 71.823 to 73.895 May 8 Euro is 1.5760, up +177 pips; May/Jun range is 1.5329 to 1.5796 May 22 Yen is 0.9531, up +63; up from May/Jun low of 0.9399 on Jun 5 Euro-Yen is 165.42, up +83; euro quite rich; high today is near 165.80 Aussie is 96.26, up +53; the May/Jun low is 92.24 on May 2 CAD is 0.9817, up +2 pips; the 2-month range is 1.0180 down to 0.9668 Interest-rate differentials moved strongly against the USD 3:35 PM
News Headlines - - - Reuters - - - MW - - - PruBear - - - FX - - - CEP - - - TTN
Oil shoots up to over $138 US April consumer credit rises $9.0 billion vs. $7.4 billion expected Fed's Bullard says Fed needs to shift Pfocus to inflation fight ECB's signal to markets seems to have been 'well-understood' - Weber Wholesale inventories up +1.3%; sales up +1.4% Inflation pressures slip in May - ECRI May nonfarm payrolls fall 49,000 vs. 50,000 expected May jobless rate soars to 5.5% vs. 5.1% expected May average hourly earnings rise 0.3% as expected 3:00 PM
Spot FX: Dollar Weaker, Euro Rallies
Euro is 1.5765 vs 1.5594-- the record high is 1.6020 on Apr 22 Dollar-Yen is 105.05 vs 105.65 -- the low is 95.71 Mar 17 Euro-yen at 165.63 vs 164.70 Aussie is 96.34 vs 95.82 3:00 PM
Briefing Bond Commentary - - - Briefing
Runaway oil stoking the inflation fires and the Fed being stuck in a box is not a good thing for the dollar. The euro is trying to eat through offers approaching 1.58 with trade eyeing 1.5820 and beyond to the record near 1.6020. Dips near 1.5720 are likely to be bought. 2:50 PM
Live Research - - - Another 'Live' Tape
The 10Y vs Tips spread is 2.498% vs 2.457% -- hotter by 4.1bp 10yr swap is +74.6, wider by 1.1bp -- the recent wide 2:45 PM
ECB toughens interest rate hike talk
Reuters - European Central Bank officials on Friday appeared to remove any lingering doubt that the ECB will hike interest rates next month, toughening the message relayed by the bank's president on Thursday. There is "ample consensus" on the ECB's governing council about the need to hike rates next month, ECB executive board member Lorenzo Bini Smaghi said at a conference in Venice. KR: The ECB mandate risks running EU off the cliff too as Japan and US strugggle with slow growth and/or recession. It's a bad dream... 2:23 PM
FX Analysts' Comments - - - FX Street
Dow Jones - "The dollar is retreating across the board and a re-test of May lows against the euro now could be in the cards as early as next week." Thomson Financial News - "The boom is over. Just as the European Central Bank is shocking markets by pointing to a rate increase in July, the pillars of the economic upswing are crumbling." Reuters - "Investors will take the ECB's comments with a pinch of salt -- it would be really perverse if the ECB raised rates now. Six months down the line the inflation outlook will improve but the growth outlook will not." 1:46 PM
Lehman Alert - - - LEH Yahoo!
KR: LEH is one the weakest links in the B/D group due to its exposure to a repo market seize-up. Last at $33.29 -0.56; its one-year range is $20.25 to $82.05. JPMorgan Chase Alert - - - JPM Yahoo! Alert -- may break below $40. Last at $40.54 -1.56; the one-year range is $36.01 - $53.25 Merrill Lynch Alert - - - MER Yahoo! A break of $40 today. Last at $39.83 -1.13; the one-year range is $37.25 to $95.00. 12:47 PM
Political Links - - - Drudge - - - The Anti-Drudge - - - Raw Story - - - Intrade - - - More KR
Global Research: Candidate McCain: A Risky Choice "John McCain will make [Dick] Cheney look like Gandhi." Pat Buchanan. "McCain was a fighter pilot, who dropped laser-guided missiles from 35,000 feet. He was long gone when they hit. What happened when they [the missiles] get to the ground? He doesn't know. You have to care about the lives of people. McCain never gets into those issues." Sen. Jay Rockefeller (D-W.Va.) 12:40 PM
TYM8 and Bunds Yield Basis
- Sept Bund futures at 4.476%, lower in yield by 7.2bp - Sept TYU8 futures at 4.273%, lower in yield by 8.1bp - Yield spread is +20.4bp vs 19.5 yesterday and +13.4bp Tuesday; +6.1bp Monday German 2Y lower in yield by 3.0bp US2Y lower in yield by 9.3bp The 2Y German/US basis is 43.6 vs 43.7 on Thursday 12:00 PM
Market Update - Up - Curve Steeper
The 5Y is the Star of the day at 3.213% lower in yield by 8.5bps The 10Y is at 3.944% lower in yield by 7.7bps The 2/30Y spread is steeper by 0.3bps at 225.0bps. The 2/10Y spread is steeper by 0.4bps at 154.5bps. The 5/30Y spread is at 143.5bps steeper by 0.7bps. The belly of the curve is at 22.2bps richer by 0.6bps. The belly of the curve hit a new one year high yield at 26.2bps earlier. 11:42 AM
Financial Times Headlines - - - FT - - - Lex - - - Alphaville - - - Wolf
Jump in jobless rate hits Wall Street Lehman remains in focus after turbulent week - 11:32 AM
Low of FTN
Another weak employment report, but not weak enough to suggest the economy has further downshifted since the first quarter. The sharp rise in the unemployment rate should assuage worries of inflation hawks waiting for a wage-price spiral. It will get plenty of play in the popular press tonight and over the weekend as the unemployment rate is the number most frequently cited by the mainstream media from this report in general and it is particularly pertinent in presidential election years. 11:23 AM
Nick Kalivas of MF Global Research - - - Log On: wkidder 147258
S&P has a note out saying that credit fundamentals are dampened. Blames material weakness in housing, tightening of credit conditions, and weakness in consumer activity. Credit defaults to rise to 10% from record low of 1%. Number of downgrade potentials 118 more than a year ago. This is a major negative for credit. Think the 2/10 curve steepens sharply if SPM8 closes below 1370. For now, players cautious as high inflation and hawkish Fed/ECB pressure the front end and economy supports the long end. Payrolls are likely to drop in June. Lots of the recently announced cuts will show up. B/D model was 217,000 which goes to show you how week the labor market really is. Job loss is probably well over 150,000. Dollar will be down on EUR on rate differential. Will the ECB actually now hike? Long end of the curve is helped, but mix of hawkish Fed and weak economy. TYU probably holds 113-00, now. Stocks should find some pressure, but I’m not sure what they are trading. Commodities seem firm despite the fact that demand is lackluster. 10:50 AM
Euribor Over Eurodollars - - - Dec IMZ8 vs Dec GEZ8
The Dec Euribor vs Dec Libor spread is 240.5bp vs 203.5bp Wednesday. The spread continues to widen out from its 40-day average of 170.4bp. It is also wider than the 224.5bp spot spread for 90-day paper.. 10:45 AM
KR Commentary
RERUN from yesterday at 15:45 ET: The belly of the curve underperformed by 11.2bps to close at a new 40-day high yield of 23.1bps today. The one year wide is at 25.5bps, and sigmas are at 2.5. The technical picture is negative, but oversold and sitting near six month lows. Today's close levels represent terrible new trade location. Volatility will remain high and ranges wide, so there will be plenty of good trading opportunities ahead. 10:22 AM
German 2Y Priced For Rate Hike in 2008
The German 2Y yield is 4.660%, higher by 4.0bp; the May/Jun high is 4.680% TODAY. The 2Y bund is forecasting a ECB rate hike by the end of the year -- possibly as soon as July -- given that it is more than 25.0bp above the "neutral" spread of +31.6bp over 4.000%, the ECB's current target. The German 2Y/10Y yield spread is inverted -- last at -24bp. The US 2Y is 2.420%, putting the spread between the two 2Y's at 224.0bp, wider than the current 200.0bp spread between central bank targets and forecasting a change in the central banks' rate differential. Done deal? Economists parse Trichet's euro-zone rate-hike warning (MarketWatch) -- European Central Bank President Jean-Claude Trichet left little doubt the next move in euro-zone interest rates is up, but the timing remains open to debate, monetary-policy experts said. While Trichet is as fond of code words and subtle hints as any central banker, Thursday's declaration that the ECB governing council "could decide to move our rates a small amount in our next meeting in order to secure the solid anchoring of inflation expectations" was a jolt, economists said. "The indication that interest rates could rise as early as next month is probably the biggest shock the ECB has delivered to financial markets in its 9 1/2 year history," wrote Austin Hughes of IIB Bank in Dublin and Bob Maes of KBC Bank in Brussels, in a research note. Both banks are owned by KBC Group. No doubt, Trichet took pains to say that a rate hike wasn't guaranteed. "I don't say it's certain. I say it's possible," he said. 10:08 AM
2Y Over Fed Funds Is 43.8bp -- Tightening On Radar
The 2Y spread vs the Fed's target of 2.000% is narrower by 4.1bp and has narrowed 18.7bp this week; it was as wide as 74.6bp on May 29. The spread remains wider than 31.6bp, its "neutral" spread level, so a rate hike to 2.250% by year end is on the radar. The May/Jun range for the volatile 2Y vs FF spread is +16.0bp on May 11 to +74.6bp May 29. Fed Funds Market Probabilities FFV8 2.075% | giving a 28% probability of rate hike to 2.250% vs 30% yesterday FFX8 2.125% | giving a 50% probability of rate hike to 2.250% vs 50% yesterday FFZ8 2.175% | giving a 70% probability of rate hike to 2.250% vs 72% yesterday 9:59 AM
From a Correspondent
The curious, non-committal price action after the report may be saying that most market participants don't understand what they're seeing,ie, though NFP was not as headline soft as expected, it was another soft report and, importantly, the household report was not helping with the notion that the labor market is on the cusp of firming--household leads at inflection points, and it's accelerating south. Moreover, the housing and consumer backdrop is becoming even more grim. KR: The fuse is definitely a slow-burning one -- the weenies don't have a long attention span, so they sell-off the market then get burned. Not to mix metaphors, but it is the eye of the hurricane now and the backside while blow down many unforclosed houses as well as the foreclosed ones. 9:45 AM
Crude oil futures jump 3.8% at $132.75 a barrel
Drudge: SUMMER SHOWDOWN: Israeli minister says alternatives to attack on Iran running out... Olmert raises spectre of large military operation in Gaza... KR: The energy markets believe that Bush/Israel are determined to go to war with Iran. And who is to stop them? Drop in payrolls, surge in unemployment indicate stalling economy Jobless rates jumps to 5.5%; biggest rise since '86 Thomson Financial - An unexpected and unusual surge in unemployment in May and another drop in payrolls indicate that the economy is stalling, economists say. 'It's a dark report, and it just shows that this economy is still in the process of trying to turn around and it hasn't yet done that,' said Bernard Baumohl of the Economic Outlook Group. 'We're still in the midst of the recession,' he said. The economy has now lost 324,000 jobs over the last five months, and May was the first time since June 2003 that the economy lost jobs for five straight months. Ongoing job losses have prompted many economists to say the US is in the midst of a recession, although others have said far more jobs -- 100,000 or more -- are normally lost each month during a recession. Economists have said the economy needs to create about 100,000 jobs each month to keep up with new workers, but the economy has averaged a gain of only 11,000 jobs over the last 12 months. 'The overall picture simply leads you to conclude that this economy is stalling, that companies are trying to protect their profit margins by trying to reduce their most costly expense so they are continuing to lay off workers in an effort to protect their margins,' Baumohl said. 9:22 AM
Naked Capitalism - - - Naked Capitalism
Should the Fed Be Independent? Is Securitization Coming Back? Lehman in Talks to Secure Up to $5 Billion Early Estimates of Losses From MBIA, Ambac Downgrade -- Bear in mind that these presumably do not become operative until Moody's joins S&P in deeming both concerns' insurance subs to be AA 9:20 AM
Wrightson Commentary - - - Wrightson ICAP
A surge in unemployment among school-age workers boosted the overall jobless rate far above expectations. Nonfarm payrolls were broadly in line with expectations 9:08 AM
USU8 Momentum (5-minute)
USM is at 114.175 momentum is Up; S-1 113.24 S-2 113.19 First res is at USU at 114.00-04, 9-day, holding so far Next res is at USU 114.20-24, 18-day First support at USU 113.18-22, Next support USU 113.04-08 KR: Bonds have bounced nicely, but are encountering surprisingly strong resistance at the 9-day zone. This area must be breeched to improve the chart look, if not, just a "dead cat" bounce. We remain under a sell signal and are just watching price action right now, staying flat. The key close level is USU 114.00 and 114.23. The front end is unch with EDZ, unch 0.0bps at 96,96. 8:59 AM
What's Happening After Non-Farm Payrolls Drop
Dollar down 22 pips || Dow futures down -66 || EDZ8 is down -1.0 ticks Nonfarm payrolls declined for the fifth straight month. The real story was that the unemployment rate soared up five-tenths to 5.5% in the month, the highest rate since 2004 and the biggest monthly jump since 1986. April's jobs figure was revised to a loss of 28k jobs from an initially reported loss of 20k jobs. The net change in manufacturing payrolls was -26k, following a downwardly revised loss of 49k jobs in the previous month. Construction lost 34k jobs. Average hourly earnings rose 0.3% from April, while the average weekly hours worked remained at 33.7. The civilian labor force rose by 577,000 to 154.5 million in May, and the labor force participation rate edged up to 66.2 percent. Total employment was little changed at 146.0 million. The employment-population ratio, at 62.6 percent, also was little changed over the month. 8:59 AM
What's Happening? Overnight
The European stock market this morning is trading slightly lower, undermined by yesterday's hawkism comments by ECB President Trichet and by today's German April industrial production report, unexpectedly fell -0.8% m/m (versus expectations of +0.2%). Dollar index up +8 pips || Euro up +2 pips || Yen down -54 pips Oil up $2.06 to $129.85 || Gold up $13.00 to $884.80 Dow futures up +19 || USU8 down 1 ticks || EDZ8 is down 12.0 ticks 2Y/10Y curve flatter by 6.3bp 10yr swap rate wider by 0.0bp || 10yr inflationary expectations hotter by 0.5bp 8:23 AM
Barchart Forecasts & Commentary - - - 7:30 Daily
Unemployment report – Today’s May payroll report is expected to show a decline of -60,000, adding to the -20,000 decline seen in April. The expected decline of –60,000 today would be the fifth consecutive monthly decline in payrolls and would produce a cumulative net job loss of 320,000 jobs since the beginning of the year. The May unemployment rate is expected to show a small +0.1 point rise to 5.1%, thus matching the current 3-year high of 5.1% posted most recently in March. The US unemployment rate in the past year has so far only risen by a total of 0.6 points from the 7-year low of 4.4% posted in late-2006 and early-2007. 8:22 AM
Overnight News Headlines - - - Reuters - - - MW - - - PruBear - - - FX - - - CEP - - - TTN
Gold Gains $13 Before Jobs Report Oil up $2 to near $130 on weak dollar, Israel comments about likely attack on Iran Morgan Stanley expects oil to reach $150/barrel by July 4 Nikkei up +148 vs projected rise of +135 JGB five-year yield soars to 10-month high Euro vs Japanese Yen Moves to a 5-month high CNBC: Lehman may announce earnings a week early to calm market concern EUR 3M || 4.96000 || 4.86438 || 0.09562 USD 3M || 2.69563 || 2.67688 || 0.01875; sprd is 226.4 vs 218.7 yesterday 7:40 AM
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Across The Curve - - - Across The Curve
Corporate bond spreads as measured by the IG 10 have tightened by about 4 basis points thus far today. The sentiment in the market has shifted significantly and clients were searching for ways to put money to work. An ebullient equity market certainly contributed to the glowing sentiment. ECB chief apparatchik Trichet who averred that the ECB was likely to raise rates at its next meeting. That seems to me to be totally incongruous and inconsistent with the massive liquidity provision which they currently have in place. He may snuff out nascent inflation but he might take a chunk of the European banking system with him. Economists at UBS in a note to customers point out that the previous relationship between initial claims and job growth seem to have broken down. In previous economic downturns initial claims had to climb above 400K to produce job losses. Thus far this year the economy has shed jobs at a rate of about 65K per month with claims averaging just 355K. 3:15 PM
Oil Soars -- Gold futures sets a five-week low
Down $5.90 to $874; traded as low as $868 earlier in the session The May/Jun low is 846.40 on May 2 Oil at $127.97, up $5.67 or 4.6%; the record high is $135.09 The Oct gold/oil ratio is 6.9 to its multi-year low TODAY Continuous CRB up 1.2% to 546.70 Copper up +0.5% 2:58 PM
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