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MNI ASIA OPEN: Ylds Up Strong Sep Jobs, Soft Landing Possible



US

FED: Rising U.S. interest rates have reduced demand for workers without pushing up layoffs, boding well for the soft landing sought by Federal Reserve officials, San Francisco Fed economist Nicolas Petrosky-Nadeau told MNI Friday.

  • The labor market remains tight with employers hiring at a substantially higher pace than before the pandemic and the unemployment rate at a 50-year low. But job openings and quits rates in key sectors have already fallen substantially from their peaks, meaning Fed tightening is doing its job to cool the economy, he told MNI's FedSpeak podcast. The Labor Department reported this week there were 10.1 million job openings in the U.S. at the end of August, a drop of 1.1 million from a month earlier.
  • The quits rate, a good predictor of real wage growth because it represents people moving to better opportunities with more pay, has also been slowing in the past six months. Quits rates in the professional and business services and leisure and hospitality sectors are back to where they were pre-pandemic, he noted. For more see MNI Policy main wire Friday at 1637ET.

FED: The Federal Reserve is unlikely to “pivot” on interest-rate increases because of recent financial turbulence like the crisis in the UK gilt market, and doing so would threaten its credibility amid high inflation, New York Fed advisor Sebnem Kalemli-Ozcan told MNI.

  • “I wouldn’t expect any intervention from the Federal Reserve on these things, unless there’s a total financial market collapse like there was in 2008,” said Kalemli-Ozcan, a professor at the University of Maryland and a member of the New York Fed’s Economic Advisory Panel. “Without that, I think they are not going to do anything – they’re going to stay in their inflation fighting mood, and hiking rates, because that’s their job.”
  • Stubborn inflation could force the Fed to hike beyond the 4.6% projection from the September Summary of Economic Projections, she said, with the federal funds rate potentially peaking at 5% or higher. For more see MNI Policy main wire at 1034ET.
US JOBS DATA: U.S. employers added 263,000 jobs in September, roughly meeting analyst expectations for 260,000, and slowing from prior months' stronger pace, while the unemployment rate dipped to 3.5%, the Bureau of Labor Statistics reported Friday.
  • Average hourly earnings grew 0.3% last month meeting expectations. It's up 5.0% on the year. Federal Reserve officials are looking for wage gains to slow as they raise interest rates. Revisions added 11,000 jobs to August and July, and the number of unemployed fell 261,000. Notable job gains occurred in leisure and hospitality (+83k) and in health care (+60k). The labor force participation rate was 62.3%, down from 62.4% in August, and the employment to population ratio held steady at 60.1%.
  • Bond yields rose across the curve in the wake of the data, with the 10-year T-Note last at 3.895%, higher by 7.5 bps on the day, as markets continue to reverse the midweek Fed 'pivot' hopes.

EUROPE

ECB: Bundesbank President Joachim Nagel tells Seddeutsche that ECB rates must rise significantly, with the ECB needing to send clear signals at the next meeting. ECB-dated OIS shows a 70bp hike priced for the Oct 27 decision with a cumulative 132bps to 1.98% by year-end.

  • Nagel sees inflation threatening growth more than rates hikes, with the German growth outlook looking weak: the German economy probably shrank slightly in Q3, worsened in Q4 and with economic contraction probably also at start of 2023 and could also slightly contract in 2023 as a whole but it probably.

US TSYS: Focus Turns to Next Wk's CPI, Sep FOMC Minutes

Tsy futures remain weaker after the bell, off lows after September employment data came out slightly better than expected w/ jobs gain of +263k vs. +255k est, August up-revision by +11k.

  • Yield curves bear steepened (2s10s climbed to -40.616) as focus turned to drop in participation rate and unemployment as traders anticipate more rate hikes into 2023. Stocks not taking the data positively either, SPX eminis falling to late session low of 3643.75.
  • Tsys held the lower range as desks turn focus on next week Thursday's CPI (0.2% MoM est, 8.1% YoY est) for next inflation metric. Sep FOMC minutes release on Wednesday at 1400ET.
  • Earlier Fed speak underscored the hawkish tempo, NY Fed Williams said need to raise rate to around 4.5% "over time" citing strong jobs market. Williams added he does expect to see inflation "down significantly next year."

OVERNIGHT DATA

  • US SEP NONFARM PAYROLLS +263K; PRIVATE +288K, GOVT -25K
  • US PRIOR MONTHS PAYROLLS REVISED: AUG +315K; JUL +537K
  • NET REVISIONS FOR AUGUST, JULY PAYROLLS +11K
  • US AUG CONSUMER CREDIT +$32.2B
  • US AUG REVOLVING CREDIT +$17.2B
  • US AUG NONREVOLVING CREDIT +$15.1B
  • CANADA SEPT JOBS +21.1K VS FORECAST +22.5K, AUG -39.7K
  • CANADA SEPT JOBLESS RATE 5.2% VS FORECAST 5.4%, AUG 5.4%
  • CANADA HOURLY WAGES +5.2% YOY; PERMANENT WORKERS +5.2%
  • CANADA SEPT JOB GAIN LED BY TEACHERS AFTER AUG DECLINE

MARKETS SNAPSHOT

Key late session market levels:

  • DJIA down 662.72 points (-2.21%) at 29265.52
  • S&P E-Mini Future down 105.25 points (-2.8%) at 3651.25
  • Nasdaq down 402.4 points (-3.6%) at 10671.23
  • US 10-Yr yield is up 6.6 bps at 3.8895%
  • US Dec 10Y are down 16.5/32 at 111-13.5
  • EURUSD down 0.0054 (-0.55%) at 0.9737
  • USDJPY up 0.21 (0.14%) at 145.35
  • WTI Crude Oil (front-month) up $4.65 (5.26%) at $93.06
  • Gold is down $17.38 (-1.01%) at $1695.17
European bourses closing levels:
  • EuroStoxx 50 down 57.99 points (-1.69%) at 3375.46
  • FTSE 100 down 6.18 points (-0.09%) at 6991.09
  • German DAX down 197.78 points (-1.59%) at 12273
  • French CAC 40 down 69.48 points (-1.17%) at 5866.94

US TSY FUTURES CLOSE

  • 3M10Y +7.495, 51.198 (L: 39.342 / H: 52.313)
  • 2Y10Y +1.597, -42.455 (L: -47.715 / H: -40.616)
  • 2Y30Y +0.985, -47.044 (L: -53.43 / H: -43.934)
  • 5Y30Y -1.359, -30.039 (L: -35.112 / H: -26.31)
  • Current futures levels:
  • Dec 2Y down 4/32 at 102-16 (L: 102-14 / H: 102-20)
  • Dec 5Y down 12/32 at 107-0.5 (L: 106-27 / H: 107-12)
  • Dec 10Y down 16.5/32 at 111-13.5 (L: 111-06 / H: 111-31)
  • Dec 30Y down 28/32 at 125-13 (L: 125-02 / H: 126-13)
  • Dec Ultra 30Y down 1-14/32 at 134-31 (L: 134-13 / H: 136-25)

US EURODOLLAR FUTURES CLOSE

  • Dec 22 -0.10 at 95.185
  • Mar 23 -0.115 at 95.110
  • Jun 23 -0.110 at 95.135
  • Sep 23 -0.110 at 95.220
  • Red Pack (Dec 23-Sep 24) -0.11 to -0.095
  • Green Pack (Dec 24-Sep 25) -0.09 to -0.075
  • Blue Pack (Dec 25-Sep 26) -0.07 to -0.07
  • Gold Pack (Dec 26-Sep 27) -0.07 to -0.055

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

  • O/N +0.00758 to 3.06629% (+0.00115/wk)
  • 1M +0.01328 to 3.31357% (+0.17086/wk)
  • 3M +0.08300 to 3.90871% (+0.15400/wk) * / **
  • 6M +0.07714 to 4.38471% (+0.15271/wk)
  • 12M +0.11158 to 4.99629% (+0.21572/wk)
  • * Record Low 0.11413% on 9/12/21; ** New 14Y high: 3.90871% on 10/07/22
STIR: FRBNY EFFR for prior session:
  • Daily Effective Fed Funds Rate: 3.08% volume: $109B
  • Daily Overnight Bank Funding Rate: 3.07% volume: $282B
US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 3.05%, $985B
  • Broad General Collateral Rate (BGCR): 3.00%, $399B
  • Tri-Party General Collateral Rate (TGCR): 3.00%, $375B
  • (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Federal Reserve/MNI

NY Fed reverse repo usage recedes to $2,226.950B w/ 101 counterparties vs. $2,232.801B in the prior session. Recent record high stands at $2,425.910B on Friday, September 30.

FOREX: USD Edges Higher For Third Consecutive Session Following NFP

  • Despite the sharp moves seen in equity indices and oil prices, currencies traded in a less volatile manner on Friday after the greenback was given a firm boost following the release of September jobs data for the US.
  • The USD Index (+0.28%) looks set to post a positive week after rising for a third successive session amid surging US yields on the back of the employment report.
  • With risk sentiment under significant pressure, GBP (-0.62%) and NZD (0.80%) were the weakest performers, however, losses/ranges were more contained compared to prior sessions this week.
  • EURUSD has faded further off the bear channel top throughout Friday trade, erasing the entirety of the mid-week rally and briefly trading below the Sep 30 low of 0.9735.
  • A significant 4% extension of the rally in crude futures underpinned CAD and NOK outperformance as general bullish sentiment after the OPEC+ cut this week was reinforced.
  • Worth noting that Japanese markets will be closed on Monday owing to observance of the Health Sports Day national holiday. Additionally, US Columbus Day and Canada Thanksgiving Holiday may see a relatively quiet start to next week.
  • Wednesday will see the release of the FOMC minutes before Thursday’s important release of US CPI for September.

Monday-Tuesday Data Calendar

DateGMT/LocalImpactFlagCountryEvent
10/10/20220600/0800*NOCPI Norway
10/10/20220830/1030*EUSentix Economic Index
10/10/20221200/0800USChicago Fed's Charles Evans
10/10/2022-EUECB Lagarde at IMF/World Bank Annual Meetings
10/10/20221300/1500EUECB Lane Opens ECB Monetary Policy Conference
10/10/20221500/1100**USNY Fed survey of consumer expectations
10/10/20221735/1335USFed Vice Chair Lael Brainard
11/10/20222145/1045**NZElectronic card transactions m/m
11/10/20222301/0001*UKBRC-KPMG Shop Sales Monitor
11/10/20222330/1030AUWestpac-MI Consumer Sentiment
11/10/20220030/1130AUNAB Business Survey
11/10/20220600/0700***UKLabour Market Survey
11/10/20220800/1000*ITIndustrial Production
11/10/20220900/1000*UKIndex Linked Gilt Outright Auction Result
11/10/20221000/0600**USNFIB Small Business Optimism Index
11/10/2022-EUECB Panetta IMF/World Bank Annual Meetings
11/10/20221245/1445EUECB Lane Keynote Speech
11/10/20221400/1000**USIBD/TIPP Optimism Index
11/10/20221530/1130USPhiladelphia Fed's Patrick Harker
11/10/20221530/1130*USUS Treasury Auction Result for 13 Week Bill
11/10/20221530/1130*USUS Treasury Auction Result for 26 Week Bill
11/10/20221600/1200USCleveland Fed's Loretta Mester
11/10/20221700/1300***USUS Note 03 Year Treasury Auction Result
11/10/20221800/1900UKBOE Cunliffe Panels IIF Annual Meeting
11/10/20221800/2000EUECB Lane NY Fed Fireside Chat
11/10/20221835/1935UKBOE Bailey in Conversation w. Tim Adams at IIF Meeting

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US

FED: Rising U.S. interest rates have reduced demand for workers without pushing up layoffs, boding well for the soft landing sought by Federal Reserve officials, San Francisco Fed economist Nicolas Petrosky-Nadeau told MNI Friday.

  • The labor market remains tight with employers hiring at a substantially higher pace than before the pandemic and the unemployment rate at a 50-year low. But job openings and quits rates in key sectors have already fallen substantially from their peaks, meaning Fed tightening is doing its job to cool the economy, he told MNI's FedSpeak podcast. The Labor Department reported this week there were 10.1 million job openings in the U.S. at the end of August, a drop of 1.1 million from a month earlier.
  • The quits rate, a good predictor of real wage growth because it represents people moving to better opportunities with more pay, has also been slowing in the past six months. Quits rates in the professional and business services and leisure and hospitality sectors are back to where they were pre-pandemic, he noted. For more see MNI Policy main wire Friday at 1637ET.

FED: The Federal Reserve is unlikely to “pivot” on interest-rate increases because of recent financial turbulence like the crisis in the UK gilt market, and doing so would threaten its credibility amid high inflation, New York Fed advisor Sebnem Kalemli-Ozcan told MNI.

  • “I wouldn’t expect any intervention from the Federal Reserve on these things, unless there’s a total financial market collapse like there was in 2008,” said Kalemli-Ozcan, a professor at the University of Maryland and a member of the New York Fed’s Economic Advisory Panel. “Without that, I think they are not going to do anything – they’re going to stay in their inflation fighting mood, and hiking rates, because that’s their job.”
  • Stubborn inflation could force the Fed to hike beyond the 4.6% projection from the September Summary of Economic Projections, she said, with the federal funds rate potentially peaking at 5% or higher. For more see MNI Policy main wire at 1034ET.
US JOBS DATA: U.S. employers added 263,000 jobs in September, roughly meeting analyst expectations for 260,000, and slowing from prior months' stronger pace, while the unemployment rate dipped to 3.5%, the Bureau of Labor Statistics reported Friday.
  • Average hourly earnings grew 0.3% last month meeting expectations. It's up 5.0% on the year. Federal Reserve officials are looking for wage gains to slow as they raise interest rates. Revisions added 11,000 jobs to August and July, and the number of unemployed fell 261,000. Notable job gains occurred in leisure and hospitality (+83k) and in health care (+60k). The labor force participation rate was 62.3%, down from 62.4% in August, and the employment to population ratio held steady at 60.1%.
  • Bond yields rose across the curve in the wake of the data, with the 10-year T-Note last at 3.895%, higher by 7.5 bps on the day, as markets continue to reverse the midweek Fed 'pivot' hopes.

EUROPE

ECB: Bundesbank President Joachim Nagel tells Seddeutsche that ECB rates must rise significantly, with the ECB needing to send clear signals at the next meeting. ECB-dated OIS shows a 70bp hike priced for the Oct 27 decision with a cumulative 132bps to 1.98% by year-end.

  • Nagel sees inflation threatening growth more than rates hikes, with the German growth outlook looking weak: the German economy probably shrank slightly in Q3, worsened in Q4 and with economic contraction probably also at start of 2023 and could also slightly contract in 2023 as a whole but it probably.

US TSYS: Focus Turns to Next Wk's CPI, Sep FOMC Minutes

Tsy futures remain weaker after the bell, off lows after September employment data came out slightly better than expected w/ jobs gain of +263k vs. +255k est, August up-revision by +11k.

  • Yield curves bear steepened (2s10s climbed to -40.616) as focus turned to drop in participation rate and unemployment as traders anticipate more rate hikes into 2023. Stocks not taking the data positively either, SPX eminis falling to late session low of 3643.75.
  • Tsys held the lower range as desks turn focus on next week Thursday's CPI (0.2% MoM est, 8.1% YoY est) for next inflation metric. Sep FOMC minutes release on Wednesday at 1400ET.
  • Earlier Fed speak underscored the hawkish tempo, NY Fed Williams said need to raise rate to around 4.5% "over time" citing strong jobs market. Williams added he does expect to see inflation "down significantly next year."

OVERNIGHT DATA

  • US SEP NONFARM PAYROLLS +263K; PRIVATE +288K, GOVT -25K
  • US PRIOR MONTHS PAYROLLS REVISED: AUG +315K; JUL +537K
  • NET REVISIONS FOR AUGUST, JULY PAYROLLS +11K
  • US AUG CONSUMER CREDIT +$32.2B
  • US AUG REVOLVING CREDIT +$17.2B
  • US AUG NONREVOLVING CREDIT +$15.1B
  • CANADA SEPT JOBS +21.1K VS FORECAST +22.5K, AUG -39.7K
  • CANADA SEPT JOBLESS RATE 5.2% VS FORECAST 5.4%, AUG 5.4%
  • CANADA HOURLY WAGES +5.2% YOY; PERMANENT WORKERS +5.2%
  • CANADA SEPT JOB GAIN LED BY TEACHERS AFTER AUG DECLINE

MARKETS SNAPSHOT

Key late session market levels:

  • DJIA down 662.72 points (-2.21%) at 29265.52
  • S&P E-Mini Future down 105.25 points (-2.8%) at 3651.25
  • Nasdaq down 402.4 points (-3.6%) at 10671.23
  • US 10-Yr yield is up 6.6 bps at 3.8895%
  • US Dec 10Y are down 16.5/32 at 111-13.5
  • EURUSD down 0.0054 (-0.55%) at 0.9737
  • USDJPY up 0.21 (0.14%) at 145.35
  • WTI Crude Oil (front-month) up $4.65 (5.26%) at $93.06
  • Gold is down $17.38 (-1.01%) at $1695.17
European bourses closing levels:
  • EuroStoxx 50 down 57.99 points (-1.69%) at 3375.46
  • FTSE 100 down 6.18 points (-0.09%) at 6991.09
  • German DAX down 197.78 points (-1.59%) at 12273
  • French CAC 40 down 69.48 points (-1.17%) at 5866.94

US TSY FUTURES CLOSE

  • 3M10Y +7.495, 51.198 (L: 39.342 / H: 52.313)
  • 2Y10Y +1.597, -42.455 (L: -47.715 / H: -40.616)
  • 2Y30Y +0.985, -47.044 (L: -53.43 / H: -43.934)
  • 5Y30Y -1.359, -30.039 (L: -35.112 / H: -26.31)
  • Current futures levels:
  • Dec 2Y down 4/32 at 102-16 (L: 102-14 / H: 102-20)
  • Dec 5Y down 12/32 at 107-0.5 (L: 106-27 / H: 107-12)
  • Dec 10Y down 16.5/32 at 111-13.5 (L: 111-06 / H: 111-31)
  • Dec 30Y down 28/32 at 125-13 (L: 125-02 / H: 126-13)
  • Dec Ultra 30Y down 1-14/32 at 134-31 (L: 134-13 / H: 136-25)

US EURODOLLAR FUTURES CLOSE

  • Dec 22 -0.10 at 95.185
  • Mar 23 -0.115 at 95.110
  • Jun 23 -0.110 at 95.135
  • Sep 23 -0.110 at 95.220
  • Red Pack (Dec 23-Sep 24) -0.11 to -0.095
  • Green Pack (Dec 24-Sep 25) -0.09 to -0.075
  • Blue Pack (Dec 25-Sep 26) -0.07 to -0.07
  • Gold Pack (Dec 26-Sep 27) -0.07 to -0.055

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

  • O/N +0.00758 to 3.06629% (+0.00115/wk)
  • 1M +0.01328 to 3.31357% (+0.17086/wk)
  • 3M +0.08300 to 3.90871% (+0.15400/wk) * / **
  • 6M +0.07714 to 4.38471% (+0.15271/wk)
  • 12M +0.11158 to 4.99629% (+0.21572/wk)
  • * Record Low 0.11413% on 9/12/21; ** New 14Y high: 3.90871% on 10/07/22
STIR: FRBNY EFFR for prior session:
  • Daily Effective Fed Funds Rate: 3.08% volume: $109B
  • Daily Overnight Bank Funding Rate: 3.07% volume: $282B
US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 3.05%, $985B
  • Broad General Collateral Rate (BGCR): 3.00%, $399B
  • Tri-Party General Collateral Rate (TGCR): 3.00%, $375B
  • (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Federal Reserve/MNI

NY Fed reverse repo usage recedes to $2,226.950B w/ 101 counterparties vs. $2,232.801B in the prior session. Recent record high stands at $2,425.910B on Friday, September 30.

FOREX: USD Edges Higher For Third Consecutive Session Following NFP

  • Despite the sharp moves seen in equity indices and oil prices, currencies traded in a less volatile manner on Friday after the greenback was given a firm boost following the release of September jobs data for the US.
  • The USD Index (+0.28%) looks set to post a positive week after rising for a third successive session amid surging US yields on the back of the employment report.
  • With risk sentiment under significant pressure, GBP (-0.62%) and NZD (0.80%) were the weakest performers, however, losses/ranges were more contained compared to prior sessions this week.
  • EURUSD has faded further off the bear channel top throughout Friday trade, erasing the entirety of the mid-week rally and briefly trading below the Sep 30 low of 0.9735.
  • A significant 4% extension of the rally in crude futures underpinned CAD and NOK outperformance as general bullish sentiment after the OPEC+ cut this week was reinforced.
  • Worth noting that Japanese markets will be closed on Monday owing to observance of the Health Sports Day national holiday. Additionally, US Columbus Day and Canada Thanksgiving Holiday may see a relatively quiet start to next week.
  • Wednesday will see the release of the FOMC minutes before Thursday’s important release of US CPI for September.

Monday-Tuesday Data Calendar

DateGMT/LocalImpactFlagCountryEvent
10/10/20220600/0800*NOCPI Norway
10/10/20220830/1030*EUSentix Economic Index
10/10/20221200/0800USChicago Fed's Charles Evans
10/10/2022-EUECB Lagarde at IMF/World Bank Annual Meetings
10/10/20221300/1500EUECB Lane Opens ECB Monetary Policy Conference
10/10/20221500/1100**USNY Fed survey of consumer expectations
10/10/20221735/1335USFed Vice Chair Lael Brainard
11/10/20222145/1045**NZElectronic card transactions m/m
11/10/20222301/0001*UKBRC-KPMG Shop Sales Monitor
11/10/20222330/1030AUWestpac-MI Consumer Sentiment
11/10/20220030/1130AUNAB Business Survey
11/10/20220600/0700***UKLabour Market Survey
11/10/20220800/1000*ITIndustrial Production
11/10/20220900/1000*UKIndex Linked Gilt Outright Auction Result
11/10/20221000/0600**USNFIB Small Business Optimism Index
11/10/2022-EUECB Panetta IMF/World Bank Annual Meetings
11/10/20221245/1445EUECB Lane Keynote Speech
11/10/20221400/1000**USIBD/TIPP Optimism Index
11/10/20221530/1130USPhiladelphia Fed's Patrick Harker
11/10/20221530/1130*USUS Treasury Auction Result for 13 Week Bill
11/10/20221530/1130*USUS Treasury Auction Result for 26 Week Bill
11/10/20221600/1200USCleveland Fed's Loretta Mester
11/10/20221700/1300***USUS Note 03 Year Treasury Auction Result
11/10/20221800/1900UKBOE Cunliffe Panels IIF Annual Meeting
11/10/20221800/2000EUECB Lane NY Fed Fireside Chat
11/10/20221835/1935UKBOE Bailey in Conversation w. Tim Adams at IIF Meeting