MNI ASIA MARKETS ANALYSIS: Strong Jobs Heeded but Handicapped

HIGHLIGHTS

• WHITE HOUSE: Biden Signs Bill Averting Railroad Shutdown
• US NOV NONFARM PAYROLLS +263K; PRIVATE +221K, GOVT +42K
• FED BARKIN: LABOR SUPPLY LOOKS LIKE IT WILL REMAIN CONSTRAINE
• FED BARKIN: FED HAS BEEN CLEAR ON ITS PLAN TO DO MORE ON INFLATION
• FREEPORT ANTICIPATES RESTART OF TEXAS EXPORT PLANT TO BE ACHIEVED AROUND YR END
  
• Poland Approves USD60/bbl Cap On Russian Oil Prices-Diplomat: NYT

Key links: MNI: Fed's Barkin Fears Persistently Short Labor Supply / MNI BRIEF: US Nov Jobs Beat Expectations; Wage Growth Surges / MNI: Canada Nov Unemployment Nears Record Low, Wages Stay Hot

US TSYS: Bonds Extend Late Highs, Jobs Data Heeded But Handicapped as Well

• Fed enters policy blackout at midnight tonight (Fed speakers Barkin and Evans offered no rebuttal on jobs). Focus will be on next week Fri Nov PPI (final demand YoY 7.2% est vs. 8.0% prior) and CPI on Dec 13, the day ahead the final FOMC annc of 2022.
• Very short end bid EDZ2 +2.75 at 95.1625, Fed terminal at 4.92% in May'Jun'23, while 2023 still weaker as prospect for return of 75bp hike remains slightly elevated. In-line, yield curves flatter, but off early wk inverted lows, 2s10s currently -6.564 at -79.275 (-79.513 low).
• Fed funds implied hike for Dec'22 slips to 51.2bp, Feb'23 cumulative has climbed to 87.6bp (84.8bp earlier) to 4.711%, terminal bounces back to 4.915% in May/Jun'23 (4.835% pre-NFP).

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

• O/N -0.00857 to 3.81543% (+0.00343/wk)
• 1M +0.01257 to 4.18486% (+0.13015/wk)
• 3M -0.03243 to 4.73257% (-0.00129/wk)*/**
• 6M -0.02643 to 5.14914% (-0.06957/wk)
• 12M -0.06528 to 5.42943% (-0.16857/wk)
• * Record Low 0.11413% on 9/12/21; ** New 14Y high: 4.77857% on 11/30/22

• Daily Effective Fed Funds Rate: 3.83% volume: $99B
• Daily Overnight Bank Funding Rate: 3.82% volume: $269B

• Secured Overnight Financing Rate (SOFR): 3.82%, $1.174T
• Broad General Collateral Rate (BGCR): 3.78%, $442B
• Tri-Party General Collateral Rate (TGCR): 3.78%, $417B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage slips to $2,049.763B w/ 94 counterparties vs. $2,050.286B in the prior session. Prior record high stands at $2,425.910B on Friday, September 30.

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

• Early trade summary carried over into the second half: better upside call hedging in SOFR options ahead key employment data while Treasury options saw better 10Y put interest. SOFR upside insurance call buying continued through midday while Treasury option focus on puts.
• SOFR Options:
  • 10,100 SFRZ2 95.187 puts, cab ref 95.4725
  • Block, 4,000 SFRG3 95.18/95.37 call spds 5.5 ref 95.085
  • Block, 5,000 short Mar 97.37/97.62/97.75 broken call flys, 4.0 net ref 96.965
  • 6,700 short Jan 95.87 puts, 11.5 ref 96.19
  • Block, 1,845 short Dec 95.87/96.12 call spds 6.5 vs. 95.755/0.20%
  • Block, 3,500 SFRM3 94.12/94.50/95.12/95.50 call condors, 17.0 ref 95.205
  • Block, 1,250 short Apr 96.5/97.50 call spds 12.5 over Blue Apr 97.5 calls
  • Block, 2,641 SFRZ 95.5/95.56 call spds .75 over SFRZ 95.31/95.37 put spds
  • 2,000 short Mar 96.75/97.12/97.37 call flys ref 96.155
  • Block, 1,250 SFRZ2 95.31/95.43/95.56 call flys, 12.0 ref 95.49
  • Block, 5,000 SFRM3 95.00/95.25 call spds, 12.5 ref 95.17-.175
  • Block, 2,000 SFRG3 95.31/95.37 call spds, 1.5 ref 95.155
• Eurodollar Options:
  • 5,000 Mar 99.50/99.75 put spds
  • 10,000 Dec 96.25/96.50 put spds
  • 5,500 Mar 97.87/98.12 put spds
  • 2,000 Dec 94.56/94.81/95.12/95.37 broken put condors ref 95.145
• Treasury Options:
  • 5,000 TYF 108 puts, 1 ref 114-23
  • 3,000 TYF 115.5 calls, 38 ref 114-24.5
  • 1,000 TYG3 111.5/113 3x2 put spds, 19
  • 2,000 TYF3 112.25/112.75 put spds, 6
  • 4,000 TYF 115/116.5 call spds, 31
  • 14,100 TYF 113.5 puts, 31-32 ref 114-20 to -19.5
  • 2,800 TYG3 108 puts, ref 114-20.5 to -21
  • 1,800 TYH3 113/114.5/116/117 broken call condor
  • 2,000 TYF 115 calls, 45

EGBs-GILTS CASH CLOSE: US Jobs Data Reverses Rally

European yields reversed sharply higher Friday afternoon as the highly anticipated November US employment report came in stronger than expected.

• 10Y Bund yields finished 10bp off post-Sept intraday lows; Gilts 15bp.
• Overall Gilts modestly underperformed Bunds; both the UK and German curves bear flattened sharply.
• EGBs held in relatively well, with spreads finishing mostly wider (though Greek spreads tightened again).
• Only limited reaction to late news that the EU had agreed a $60/bbl price cap for Russian oil exports (EUR and GBP jumped, though.)
• In European data, Oct saw a stronger-than-expected contraction M/M, but this masked an uptick in core.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 7.6bps at 2.105%, 5-Yr is up 6.7bps at 1.865%, 10-Yr is up 3.9bps at 1.853%, and 30-Yr is down 3.2bps at 1.687%.
• UK: The 2-Yr yield is up 7.3bps at 3.352%, 5-Yr is up 7.2bps at 3.281%, 10-Yr is up 5.3bps at 3.153%, and 30-Yr is up 9bps at 3.495%.
• Italian BTP spread up 2.5bps at 191.1bps / Greek down 2bps at 204.6bps

EGB Options: Light Trade To End The Week Includes Downside Euribor

Friday's Europe rates / bond options flow included:

• 0RZ2 97.00/96.875 1x1.5 put spread bought for 1.5 (bot the 1 leg) in 7.5k

FOREX: USD Index Set To Post Weak Close Despite Post-NFP Surge

• Stronger headline US employment data gave the greenback a solid initial reprieve with the USD index surging over 1% in the immediate aftermath of the report. However, a slow erosion of these gains throughout Friday’s session saw the index slip back into negative territory, which could see the greenback slip for a third consecutive session and post its lowest close since late June.
• USDJPY volatility continued in heightened fashion, both before and after the release of the US data. A continuation of JPY strength saw USDJPY trade down to 133.63 in early trade on Friday, narrowing the gap with the next touted support at 132.56, the Aug 15 low.
• Short-term positioning dynamics saw a very strong reaction to the data, with the pair rallying from around 134.20 to highs of 135.98. The pair was unable to reverse the entirety of the gains, however, will be closing around 3.5% lower on the week overall.
• One currency pair that was able to pare the entire post-payroll move was GBPUSD. Cable grinded sharply back to briefly test the 1.23 handle again with the technical trend remaining firmly bullish after clearing the 200-day moving average. The immediate focus for next week is on 1.2339, a Fibonacci projection.
• Elsewhere, AUDNZD (-0.65%) continues its impressive break, after extending below 1.0750 on Thursday and trading within close proximity of the March 2022 lows at 1.0615.
• US ISM Services PMI data on Monday precedes the RBA decision on Tuesday, the first of several final DM and EM central bank meetings of 2022.

FX Expiries for Dec 2 NY Cut at 1000ET (Source DTCC)

• USDCNY 1.14bn at 7.00
  
• EURGBP 1.6bn at 0.8600.
• USDCAD 2.22bn at 1.3540 (Wed).
• EURUSD: 1.0450 (828mln), 1.0500 (606mln)1.0575 (722mln).
• GBPUSD: 1.2300 (254mln).
• EURGBP: 0.8500 (1.6bn).
• USDJPY: 134 (875mln), 135.45 (322mln), 136 (291mln).
• USDCAD: 1.3550 (410mln).
• USDCNY: 6.95 (2.39bn), 7.00 (1.14bn), 7.08 (375mln).

Late Equity Roundup: Materials and Defense Shares Lead Rebound

Stocks back near opening levels after the FI bell, with light selling into late session highs at the moment. Higher than expected Nov jobs gain of +263k (+200k est) not high enough to seriously dampen expectations of a step-down to 50bp hike at Dec 14 FOMC -- triggered dip buyers through the session.

• Stocks gained further support after headlines the EU has agreed to put a "$60 price cap" on "Russia oil exports" (Tsys bounced/US$ weakened, but no react in WTI or Brent crude, however). SPX eminis currently trade -13 (-0.32%) at 4068.75; DJIA -20.64 (-0.06%) at 34374.28; Nasdaq -42.4 (-0.4%) at 11440.34.
• SPX leading/lagging sectors: Materials (+1.10%) w/ Albermarle Corp (ALB) +3.45%, FMC Corp (FMC) +3.21% and Sherwin-Williams (SHW) +2.99%; Industrials (+0.57%) lead by capital goods, specifically aerospace and defense shares: Huntington Ingalls Ind (HII) +4.08%, Boeing (BA) +4.30%, Northrop Grumman (NOC) +3.15%. Laggers: After making decent gains the last few sessions Information Technology sector underperforming (-1.35%), weighed by semiconductor shares (AMD -2.37%, Micron -1.89%, Intel -1.74%).
• Dow Industrials Leaders/Laggers: Boeing (BA) +7.41 at 183.19, Honeywell (HON) +1.19 at 218.58, PG +1.27 at 150.52. Laggers: Salesforce.com (CRM) continued the week's slide -2.76 at 144.24, Goldman Sachs (GS) -4.10 at 380.51, Chevron (CVX) falling late as crude traded weaker (CVX) -1.57 at 180.92.

E-MINI S&P (Z2): Uptrend Remains Intact Despite Latest Pullback

• RES 4: 4234.25 High Aug 26
• RES 3: 4175.00 High Sep 13 and a key resistance
• RES 2: 4146.63 76.4% retracement of the Aug 16 - Oct 13 downleg
• RES 1: 4110.00 High Dec 1
• PRICE: 4068.00 @ 1545ET Dec 2
• SUP 1: 3959.04 20-day EMA
• SUP 2: 3912.50/3904.81 Low Nov 17 / 50-day EMA values
• SUP 3: 3750.00 Low Nov 9
• SUP 4: 3704.25 Low Nov 3 and key short-term support

S&P E-Minis remain in an uptrend despite the pullback back from its most recent highs. Gains this week have resulted in a break of resistance at 4050.75, the Nov 15 high. This confirms a resumption of the uptrend and marks an extension of the price sequence of higher highs and higher lows. Sights are on 4146.63, a Fibonacci retracement. On the downside, key short-term support has been defined at 3912.50, the Nov 17 low.

COMMODITIES

POLAND: NYT: Poland Approves USD60/bbl Cap On Russian Oil Prices-Diplomat: NYT reporting comments from Poland's permanent representative to the EU Andrzej Sados stating that the gov't in Warsaw has formally approved the G7 oil price cap on Russian crude of USD60/bbl, with a review mechanism in place.

Monday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
03/12/2022	0230/0330			EU	ECB Lagarde at Bank of Thailand Roundtable
05/12/2022	2200/0900	*		AU	IHS Markit Final Australia Services PMI
05/12/2022	0030/0930	**		JP	IHS Markit Final Japan Services PMI
05/12/2022	0145/0945	**		CN	IHS Markit Final China Services PMI
05/12/2022	0145/0245			EU	ECB Lagarde at Central Bank Governors IMF Seminar
05/12/2022	0700/0200	*		TR	Turkey CPI
05/12/2022	0815/0915	**		ES	IHS Markit Services PMI (f)
05/12/2022	0845/0945	**		IT	IHS Markit Services PMI (f)
05/12/2022	0850/0950	**		FR	IHS Markit Services PMI (f)
05/12/2022	0855/0955	**		DE	IHS Markit Services PMI (f)
05/12/2022	0900/1000	**		EU	IHS Markit Services PMI (f)
05/12/2022	0930/1030	*		EU	Sentix Economic Index
05/12/2022	0930/0930	**		UK	IHS Markit/CIPS Services PMI (Final)
05/12/2022	1000/1100	**		EU	retail sales
05/12/2022	-			EU	ECB Panetta at Eurogroup Meeting
05/12/2022	1330/0830	*		CA	Building Permits
05/12/2022	1445/0945	***		US	IHS Markit Services Index (final)
05/12/2022	1500/1000	***		US	ISM Non-Manufacturing Index
05/12/2022	1500/1000	**		US	factory new orders
05/12/2022	1630/1130	*		US	US Treasury Auction Result for 26 Week Bill
05/12/2022	1630/1130	*		US	US Treasury Auction Result for 13 Week Bill