MNI ASIA OPEN: June Rate Cut Chances Rise Post Jobs Gain

US

US POLICY (MNI): US Retail Sales Seen Recovering From Sharp Drop: A real-time indicator of U.S. retail sales from the Federal Reserve Bank of Chicago showed the surprise drop in retail sales for January turned more moderate into February, while inflation for retail goods and food services excluding autos picked up -- signs of slowing momentum in consumer spending as goods prices rebounded after falling in the latter half of 2023.

• The newly relaunched Chicago Fed Advance Retail Trade Summary, or Carts, tracks the Census Bureau's official retail sales report on a weekly basis, providing an early snapshot of retail spending using multiple high-frequency consumer spending indicators including payment card transactions, retail foot traffic, gas sales and consumer sentiment.

NEWS

US (MNI): Senate Struggles To Reach Agreement On Spending Package: Caitlin Emma at Politico reporting on X that, "Several GOP border-related amendments causing big problems," for the six-bill spending package which must be passed by the Senate today to avoid a partial government shutdown at midnight.

INTERVIEW (MNI): BOC Has Case For No Cut This Year: Dal's McNeil:There's an outside chance the Bank of Canada doesn't cut interest rates this year and it could at least delay until the Federal Reserve moves, an economics professor who has worked with former BOC advisers and did PhD research at the central bank told MNI.

US (MNI): Speaker Johnson Remains Resistance To Foreign Aid Package: Jake Sherman at Punchbowl reporting that House Speaker Mike Johnson (R-LA) has pushed back against comments from a bipartisan group of committee chairs who indicated the Speaker had agreed to a floor vote on a new foreign aid package.

EU COMMISSION (MNI): Risks Of Splits Within Commission As Elections Approach: There are increasing risks of divisions emerging within the European Commission's College of Commissioners as the European Parliament elections approach on 6-9 June.

SLOVAKIA (MNI): France Leaves Slovakia Off Ukraine Call Amid Increasing EU Isolation: Slovakia's Denník N reporting that according to its sources, both Slovakia and Hungary were deliberately excluded from a video call of EU foreign affairs and defence ministers organised on 7 March by the French gov't to discuss support for Ukraine.

SWITZERLAND (MNI): Federal Council Approves Mandate For New Talks w/EU: The Swiss Federal Council, Switzerland's collective head of state and gov't, has confirmed in a statement that it has approved a negotiating mandate with the EU that could set up new talks between the two sides.

US TSYS : Tsys Near Middle Wide Range, Focus on Tue's CPI Data

• Treasury futures are drifting in marginally firmer territory after the bell, near the middle of a wide range on mixed reaction to this morning's February employment data. Tsys gapped lower on the higher than expected jobs gain of 275k vs. 200k est. but reversed course just as quickly as markets digested the large down revisions to January (229k from 335k, private to 177k from 317k).
• The unemployment rate surprisingly increased two tenths from 3.66% to 3.86% (cons 3.7), poking above October’s 3.84 for the highest since Jan’22. The FOMC eyes 4.1% for end-2024.
• Currently, Jun'24 10Y futures are +2.5 at 111-23.5 (111-08 low/112-04.5 high). The contract has this week topped resistance at the 50-day EMA highlighting a bullish reversal. 111-27, 50% of the downleg off the Feb 1 high, has been breached. This opens 112-10+, A Fibonacci retracement. For bears, a reversal lower would return focus back to support at the 109-25+ bear trigger, Feb 23 low. Initial firm support to watch lies at 110-21, the Mar 4 low.
• Focus turns to next week Tuesday's CPI release at 0830ET.

OVERNIGHT DATA

US DATA (MNI): Beats for February nonfarm paryolls estimates: NFP 275k vs cons 200k, private 223k vs cons 165k.

• The heavy two-month downward revision of -167k landed mostly in Jan (revised -124k to 229k) but also a -43k revision to 290k in Dec.
• Even more so, private payrolls see a two-month downward revision of -204k (Jan -140k, Dec -64k).
• Three-month averages are still strong though: 265k for nonfarm and 205k for private. These averages were last seen in June.
• Powell said yesterday that he focuses on private for a better sense of underlying momentum.

• It's despite the participation rate being almost unchanged (62.54 after 62.52), as the labor force increased 150k but employment fell -184k in the household survey.
• The latter yet further widens the gap vs still strong payroll job creation. Adjusting for the population control from last month’s release, household survey employment has declined -628k over the latest three months vs +794k for payrolls.
• The unchanged participation masks a strong increase in prime-age, rising a rounded two tenths to 83.5 back to joint cycle highs from mid-2023. That could be a hawkish factor ahead if it struggles to push further beyond those levels that were last seen in the early 2000s.
• Going against it was a further pullback in 16-24 participation, with the 55+ cohort flatlining at still just shy of 2pps below pre-pandemic levels.

CANADA DATA: Canada Q4 Capacity Utilization -0.9% From Year Earlier: Total industrial capacity utilization -0.9% from Q4 2023, -0.1% QOQ,. Canadian industries operated at 78.7% of their production capacity in Q4 vs 78.8% in Q3.

• Construction utilization rate -0.7 pp to 82.7% in Q4, -3.5% YOY, decline is at odds with talk of massive housing shortage but consistent with drag of BOC's rate hikes.
• Manufacturing sector fell 0.7 pp to 76.9% in Q4, decline was mainly due to a slowdown in petroleum and coal products and chemicals.

MARKETS SNAPSHOT

• Key market levels of markets in late NY trade:
• DJIA up 22.99 points (0.06%) at 38815.35
• S&P E-Mini Future down 21.25 points (-0.41%) at 5141
• Nasdaq down 128.5 points (-0.8%) at 16147.04
• US 10-Yr yield is up 0.4 bps at 4.0866%
• US Jun 10-Yr futures are up 2.5/32 at 111-23.5
• EURUSD down 0.0009 (-0.08%) at 1.0939
• USDJPY down 1 (-0.68%) at 147.05
• WTI Crude Oil (front-month) down $1 (-1.27%) at $77.93
• Gold is up $16.97 (0.79%) at $2177.00
• European bourses closing levels:
• EuroStoxx 50 down 13.11 points (-0.26%) at 4961.11
• FTSE 100 down 32.72 points (-0.43%) at 7659.74
• German DAX down 28.34 points (-0.16%) at 17814.51
• French CAC 40 up 11.79 points (0.15%) at 8028.01

US TREASURY FUTURES CLOSE

• 3M10Y +0.107, -131.172 (L: -135.551 / H: -128.128)
• 2Y10Y +1.921, -40.158 (L: -43.986 / H: -36.591)
• 2Y30Y +3.199, -22.9 (L: -30.248 / H: -17.491)
• 5Y30Y +2.922, 19.684 (L: 15.401 / H: 23.805)
• Current futures levels:
• Jun 2-Yr futures up 1.5/32 at 102-21 (L: 102-15.625 / H: 102-26.25)
• Jun 5-Yr futures up 3/32 at 107-24 (L: 107-12 / H: 108-01.75)
• Jun 10-Yr futures up 2.5/32 at 111-23.5 (L: 111-08 / H: 112-04.5)
• Jun 30-Yr futures down 7/32 at 121-16 (L: 121-02 / H: 122-09)
• Jun Ultra futures down 9/32 at 130-14 (L: 129-29 / H: 131-17)

US 10Y FUTURE TECHS: (M4) Bull Cycle Extends

• RES 4: 113-17 High Feb 2
• RES 3: 112-31 2.0% 10-dma envelope
• RES 2: 112-10+ 61.8% retracement of the Feb 1 - 23 bear leg
• RES 1: 112-04+ High Mar 8
• PRICE: 111-23+ @ 1530 ET Mar 8
• SUP 1: 110-31+ 20-day EMA
• SUP 2: 110-21 Low Mar 4
• SUP 3: 110-05+/109-25+ Low Mar 1 / Low Feb 23 and bear trigger
• SUP 4: 109-14+ Low Nov 28

Treasuries traded higher Friday after post-NFP volatility and are holding on to the week’s gains through the London close. The contract has this week topped resistance at the 50-day EMA highlighting a bullish reversal. 111-27, 50% of the downleg off the Feb 1 high, has been breached. This opens 112-10+, A Fibonacci retracement. For bears, a reversal lower would return focus back to support at the 109-25+ bear trigger, Feb 23 low. Initial firm support to watch lies at 110-21, the Mar 4 low.

SOFR FUTURES CLOSE

• Mar 24 -0.005 at 94.698
• Jun 24 -0.005 at 94.950
• Sep 24 +0.005 at 95.290
• Dec 24 +0.025 at 95.640
• Red Pack (Mar 25-Dec 25) +0.040 to +0.045
• Green Pack (Mar 26-Dec 26) +0.015 to +0.030
• Blue Pack (Mar 27-Dec 27) +0.005 to +0.015
• Gold Pack (Mar 28-Dec 28) -0.01 to -0.005

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M +0.00099 to 5.31870 (-0.00392/wk)
• 3M -0.00038 to 5.32084 (-0.00942/wk)
• 6M -0.00581 to 5.22984 (-0.03747/wk)
• 12M -0.01055 to 4.98694 (-0.06960/wk)

• Secured Overnight Financing Rate (SOFR): 5.31% (+0.00), volume: $1.793T
• Broad General Collateral Rate (BGCR): 5.30% (+0.00), volume: $695B
• Tri-Party General Collateral Rate (TGCR): 5.30% (+0.00), volume: $686B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $98B
• Daily Overnight Bank Funding Rate: 5.31% (+0.00), volume: $280B

FED Reverse Repo Operation

• RRP usage rebounded to $444.803B from $436.754B Thursday - the lowest level since May 2021.
• Meanwhile, the latest number of counterparties climbs to 74 from 72 Thursday (compares to 65 on January 16, the lowest since July 7, 2021).

FOREX USD Index Consolidating 1.1% Weekly Decline, JPY Outperforms

• Despite some volatile swings for the greenback following the US employment report on Friday, the USD index is broadly consolidating an impressive 1.10% decline this week. The index has been led lower by an impressive 2% USDJPY selloff as BOJ normalisation speculation builds.
• Post data volatility was stoked by above-estimate headline non-farm and private payrolls prints and then ensuing large downside revision to the prior figures. USDJPY rallied to 147.45 before rapidly falling to fresh session and weekly lows of 146.49. With the details of the US data seemingly not as bad as first feared, the USD traded on a firmer footing into the close.
• Of course, this just tells one side of today’s story, with concurrent BoJ sources reports from both JiJi News and Reuters boosting the yen early on Friday. Both reports eye the possibility of a March BoJ rate hike should the wage negotiation phase with unions next week continue to show signs of healthy wage growth. USD/JPY traded well through overnight Asia-Pac lows to extend losses off the weekly high to over 300 pips.
• A close at current or lower levels would confirm a clean break of both the 50- and 100-dma supports and a print through 146.24 would fully reverse the NFP-inspired rally on Feb 02.
• Elsewhere, late weakness for equities had little impact on either AUD or NZD, which consolidate impressive rallies this week on the back of the broader technical breakdown for the dollar.
• The AUDUSD recovery across the week threatens a recent bearish theme and price has cleared the 50-day EMA. Resistance at 0.6595, the Feb 22 high, has also been cleared and this strengthens a bullish theme, signalling scope for a continuation higher. Potential is seen for a climb towards 0.6708, a Fibonacci retracement.
• All focus turns to US CPI next Tuesday, with consensus firmly centered around a 0.3% M/M increase in core CPI after a surprisingly strong 0.39% M/M in January.

MONDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
09/03/2024	0130/0930	***		CN	CPI
09/03/2024	0130/0930	***		CN	Producer Price Index
11/03/2024	2350/0850			JP	GDP Final Q4 2023
11/03/2024	0700/0800	***		NO	CPI Norway
11/03/2024	0800/0900			EU	ECB's Cipollone in Eurogroup meeting
11/03/2024	-	***		CN	Money Supply
11/03/2024	-	***		CN	New Loans
11/03/2024	-	***		CN	Social Financing
11/03/2024	1201/1201	**		UK	KPMG/REC Jobs Report
11/03/2024	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill
11/03/2024	1530/1130	*		US	US Treasury Auction Result for 13 Week Bill
11/03/2024	1700/1300	***		US	US Note 03 Year Treasury Auction Result