Global Macro APAC Morning Brief - US Super Friday, Here Come the Non-Farm Payrolls...

Happy Macro Fri 4 Oct 2019

APAC Global Macro Morning Brief - US Super Friday, Here Come the Non-Farm Payrolls...

Our Macro morning Brief piece yesterday was titled, can Service PMIs Reverse Sentiment… & they seemed to have done so at least for the o/n sessions, yet from the perspective of bad news = good news.

US ISM Non-Manufacturing – the pillar of the US economy as it captures domestic consumption which is +70%0 of US GDP – had a pretty big miss coming in at 52.6a  vs. 55.1e & down from a previous 56.4. Our Economist, Christopher Dembik takes a deeper look at the print here.

On top of that, the weekly jobless claims hit a 4wk high & once again, folks ignored the Markit PMI services print of 50.9 a/e/p. Factory orders were a touch better at -0.1%a vs. -0.2%e, 1.4%p – yet the key take away was that the ISM Non-Manufacturing is signalling weakness in the American consumer, which will be translated to the Fed need to do more, both in regards to speed & potentially magnitude.

The probability of a cut from the Federal Reserve on the upcoming Oct 30 meeting is now at 85%, at the start of the wk (prior to the ISMs & econ data) it was c. 40%.

If one looks at the Dec 11 meeting, that’s now a 96% probability with c. 60% of that being for at least 50bp cut from today - implying likely a cut in Oct & Dec.

With four key FOMC members due to speak in the next 24 hrs, the most important scripts will be from Powell and George – the latter, alongside Rosengreen was in camp no rate cuts in the previous meeting.

If George starts to signal a shift towards the dovish camp, we could see quite a significant further mover lower in bond yields (Higher in bond prices), as well as resurgence in upside for Gold & Silver. 

What the different a mere week can make… once again reinstating there are always profitable opportunities out there.

Wishing everyone a strong & profitable close on this Super Friday, as well as phenomenal wkd up ahead.


Cross-Assets Snapshot:

We saw the yen 106.83 +0.24%, gold 1509 +0.38% & US 10yrs bond futures 131.70 +0.46% bid up – except the driver of lower bond yields o/n were more expectations of a more dovish Fed

Interestingly enough, we continue to see broader dollar weakness… DXY 98.8620  (sub 99.0) was down a touch at -0.16%, yet some risk-on assets such as AUD 0.6748 & NZD 0.6304 flew at +0.52% & +0.54%. On the EM FX side, LatAm led the charge again the USD with the like of the Brazilian real clocking a +1.20% rise.   

For further update on Currencies, catch John Hardy’s latest thoughts: Risk Sentiment eyes US Data, EU reply to BoJo Brexit plan

Almost all the European equity indices closed in the red overnight – bear in mind that Germany was out yest on public hols, so it will be interesting to see what catch-up (if any) the Dax plays today – especially with peripheral news on US / EU trade tariffs to escalate shortly given the WTO ruling. Worth noting, there is likely to be a similar ruling on the US’ Boeing later in Q4.

We did see silver & brent crude flat overnight at 17.56 & 57.71 – both are up c. +20bp to +30bp this early Asia Fri morning. Counter to USDJPY… USDCHF actually rose by +0.22%

Today:

• US: Non-farm Payrolls 145K e 130k p, AHE 3.2% e/p, Unemployment Rate 3.7% e/p, TB
  
  
  • I keep hearing the whisper number dropping like a stone, some suggesting its sub 100K, our CIO & Chief Economist Steen Jakobsen, is expecting over the course of the 4Q to get a negative NFP
  
  
  • A lot of FOMC members speaking in the next 24hrs including: Fed Chair Powell (02:00), Brainard (02:10), George (03:45) & Quarles (04:00) – will be interesting to see what interpretation of the latest data is
• AU: Retail Sales, RBA Stability Report, New Home Sales

• CA: Ivey PMI & Trade Balance

• China out with Golden Week continuing, they are not back in until Tue Oct 8^th

  
  
  Next Week: China Back In from Golden Week… focus returns to potential US / China Trade Negotiations… potential kick-off of US / EZ Trade Tariffs linked to WTO reports

   

• AU: Mon Bank Holiday plus daylights saving change this wkd (Sun 6 Oct), Home Loans, M1 Inflation Expectations, RBA Annual Report

• NZ: Business Mfg. index

• US: Inflation, FOMC Minutes, JOLTS jobs, UoM Consumer Sentiment, PPI

• EZ: GER Factory Orders, GER IP, ECB Mins, GER CPI

• CH: Caixin Serv. PMI, Trade Balance, New Loans, Money Supply

• JP: Leading Indicators, Bank Lending, PPI, M2 Money Stock

• UK: Manufacturing Production, Industrial Production, Trade Balance

• CA: Housing Starts, Building Permits, Jobs Data

• Other: OPEC Meetings, US / China Trade Negotiations should come back on line, China gets back in on Tue Oct 8^th - Does HK or / and Trade Tariffs escalate?

   

  
  4^th Quarter Outlook is out: Taking Down The Killer Dollar

• Please check out our latest quarterly which focuses on the key culprit that is sucking up all the oxygen in the global economy, the strong US dollar.

Other:

• Please remember to join us next week for Macro Monday, where we will go through our 4^th Quarter Outlook in detail. It will be the usual 08:30 SGT/HKT Monday Morning, 20:30 ET. Wishing everyone a fabulous & well deserved wkd 

   

• To catch this wk’s Macro Monday Click here…  & replay of the call here

   

• Don’t forget to bookmark & check our Daily SaxoStrats calls from the European morning session c. 09:00 CET