My Diary 491 --- December 5, 2008:All Eyes on Payroll

December 5, 2008:All Eyes on Payroll

All eyes are on the Payroll tonight, but yesterday’s covered jobless rate (3.1% vs 2.0% a year ago) and continuing claims (+ 89K to 4.087mn, highest since Dec1982) suggest unemployment rate will clear 6.8% in Nov, up from 6.5% in Oct and 6.1% in Sep.

News flow -- +VE on some central banks cutting BT, such as Sweden (175bp), BoE(100bp) and ECB(75bp). But Fed seems on the –VE side as its PM announcement on reverse GSE auction seems purchasing basically on 1-2year paper. This disappointed the market who expected the program to help bring mortgage (long) rates down… 10yr agency spreads immediately widened 15bp and more. This also weighed on stocks, which fell led by financials to close ~3%...Anyway I think lowers rates and lower monthly mortgage payments don't help when people don't have jobs.

Corporate earning --- warnings from DuPont (reduced automotive-construction demand), Merck, AMD and Norkia added concerns on industrial production outlook. In addition, crude breaks down another 6.5% and Merrill is calling $25 on fears that the ongoing global recession to further plague demand and petrochemical products.

Trading pattern --- I observed big global macro funds and managed futures traders becoming increasingly anxious to get out of Long UST & Short S&P before they are trapped in a dearth of illiquidity by mid Dec…Local markets is to follow US today and I continue to believe that we should reduce risk before traders and brokers leaving for holiday vacations…Why not? A Bid farewell to a truly horrid 2008….

Oversea Markets Review

Global equities decreased 1.3% yesterday, with stocks slid 1% in Japan, -0.4% in EU and -3.0% in US. In contrast, EM equities posted a 0.9% gain. Elsewhere, 1MWTI oil declined $3 to $43.67/bbl, down nearly $11 this week. UST yields sank with 2yr down 7bp to 0.81% and 10yr by 11bp to 2.55%. Two- and ten-year yields are down 17bp and 37bp, respectively, this week—down 74bp and 140bp since October. USD fell >1% vs YEN to 92.2, a 13-year low, and 0.5% against EUR to $1.278.