MNI ASIA OPEN: Labor Market Seen Cooling On Eve Of FOMC Decision

NEWS

Latest MNI Previews For Upcoming Macro Events

MNI UST Issuance Deep Dive: May 2023 - Refunding Preview

MNI ECB Preview - May 2023: Stepping Down, But Not Done Yet

MNI Norges Bank Preview - May 2023: Persistent NOK Weakness to Drive Further Hikes

MNI BCB Preview – May 2023: Maintaining Steadfast Approach

North America

US (MNI): MNI INTERVIEW: US Labor Market Seen Cooling - Paychex
The U.S. job market shows hints of a soft landing including more modest wage gains, Frank Fiorille, a vice president at the payroll firm Paychex, told MNI. "Wage inflation has definitely been slowing and it's actually been slowing for several months now to its lowest level since 2021," Fiorille said. "We see that as a positive trend," he said, showing that "what the Fed is doing is having some impact."

US Politics (BBG): House Democrats Set Up Fallback to Force Debt Limit Vote
House Democrats worked to get around Speaker Kevin McCarthy and Republican leaders with a procedural move that could speed up a vote on a debt ceiling increase as US default looms as soon as June 1. Democrats will need some moderate House Republican to cooperate for the gambit to succeed because the discharge petition would require 218 signatures — a majority of the House — to force action. McCarthy and his leadership team are certain to put maximum pressure on GOP members not to go along with the move, but only five would have to defy the speaker to move the measure forward.

US Banks (BBG): Wall Street Rattled by 20% Plunge in Pair of Banks
Just a day after Wall Street breathed a sigh of relief with the acquisition of First Republic Bank, a selloff in US regional lenders fueled renewed anxiety over financial stability, sinking stocks across the board and spurring a flight to the safest corners of the market.

US (BBG): SVB’s $7 Billion Muni Portfolio Seen Requiring ‘Deep Concession’
Silicon Valley Bank’s roughly $7 billion municipal bond portfolio could pose a challenge for BlackRock Inc. as it starts liquidating the failed bank’s securities, investors say. The lender’s muni holdings were mostly long-dated bonds with low coupons, according to Nicholos Venditti, senior portfolio manager at Allspring Global Investments LLC, who said he saw the breakdown in a list circulated by dealers.

Europe

ECB (MNI): MNI ECB WATCH: Slowing Core Prices, Lending, Set Up 25BP Hike
The European Central Bank is expected to slow the pace of key interest rate rises to 25bp on Thursday, amid evidence that base effects and previous policy decisions are beginning to turn the tide on inflation.

Norway (MNI): MNI NORGES WATCH: Well-Flagged 25Bp Hike Seen, More On The Way
Norway’s central bank looks set to follow up its 25-basis-point hike in March with another in May, taking the policy rate to 3.25%, and to signal that it will continue to tighten by a further 25bp in June.

Asia/Australasia

Australia (MNI): MNI: RBA Inflation Strategy to Protect Labour Gains
The Reserve Bank of Australia will take a longer time to pull inflation down to protect gains made in the labour market, but a “time limit” exists and policymakers will do what they can to ensure expectations do not become entrenched, according to Governor Philip Lowe.

Energy

OIL (BBG): Oil Tumbles as Ominous Economic Signs Smash Thinly Traded Market
Oil plunged the most in more than a month as thin trading volumes exacerbated the fallout from concerns about the health of the global economy. Downbeat data on the US jobs market and Chinese manufacturing sent West Texas Intermediate below $72 a barrel on Tuesday, the lowest intraday price since March 27. The drop of almost 5% was the biggest daily percentage decline since the banking-industry turmoil in mid-March.

GAS (BBG): Aramco in Talks With Sinopec, Total on $10 Billion Gas Deal
Sinopec and TotalEnergies SE are among companies holding talks to invest in the Jafurah development in Saudi Arabia, according to people familiar with the matter, as the kingdom seeks to exploit one of the world’s largest untapped gas fields.

DATA

**MNI: US BLS: JOLTS OPENINGS RATE 9.590M IN MAR
**MNI: US BLS: JOLTS QUITS RATE 2.5% IN MAR

**MNI: US MAR FACTORY ORDERS +0.9%; EX-TRANSPORT NEW ORDERS -0.7%
**MNI: US MAR NONDEFENSE CAP GOODS ORDERS EX AIRCRAFT -0.6%

US DATA: JOLTS Show Further Steady Moderation In Labor Market

• A second monthly downside surprise for JOLTS job openings in March, at 9.590M (cons 9.736M) after minimal revisions.
• An also sizable decline in the previously known level of unemployment meant the ratio to unemployed only edged from 1.68 to 1.64, a new low since Oct’21 and down from the 1.96 of Dec but still historically elevated vs the 1.2 averaged in 2019.
• Quit rates also pushed lower, with the total down from 2.56 to 2.48% and private from 2.85% to 2.74%, both technically the lowest since Feb’21.

US TSYS: Only Modest Paring Of Gains Post JOLTS & Regional Banks Pressures

• Cash Tsys have seen a bid re-emerge in recent trading, more notably so for the long-end, but remain off highs seen after JOLTS data showed further labor market moderation. Coming on day one of the two day FOMC meeting, it has also seen WTI slide by than 5% and regional banks under pressure.
• Debt limit back and forth continues, with Schumer most recently saying they can only debate spending after the clean debt bill is passed, with a full two-year debt-limit extension required. McConnell will be at the May 9 meeting that was earlier reported that Biden will have with McCarthy.
• 2YY -16.7bp at 3.974%, 5YY -17.6bp at 3.459%, 10YY -14.0bp at 3.428% and 30YY -9.4bp at 3.714%.
• TYM3 trades +1-03+ at 115-19+, just within earlier highs of 115-21 with next resistance seen at 115-30+ (Apr 26 high).
• Aside of course from the FOMC decision, tomorrow includes ADP employment and ISM services.

FOREX: JPY Outperforms Amid Lower US Yields, Post RBA Aussie Rally Moderates

• USDJPY looks set to retrace a portion of its recent surge on Tuesday, as below estimate US data has placed renewed downward pressure on front-end US yields, prompting a relief rally for the struggling Yen over the course of the US session.
• Additionally, significant pressure on major equity indices has exacerbated the move with USDJPY seeing a near 1% reversal to print session lows at 136.32. Currently down 0.6%, the pair looks set to snap a 3-day winning streak. Initial support lies at 136.14, the May 1 low. However, more significant support is seen at 135.13, the Apr 19 high and a recent breakout level.
• Weaker equities have acted as a headwind for the Australian dollar, which earlier in the session had been the best performing major. The RBA surprisingly raised its cash rate by 25 basis points to 3.85%, stressing that it aimed to return inflation to its 2-3% target in a "reasonable timeframe", strengthening language on future hikes.
• Despite the initial AUD surge, the late reversal has been most notable against the JPY, with AUDJPY declining roughly 1.7% from the day’s highs and reversing the entire overnight advance.
• Elsewhere, the Norwegian Krone was the worst performer in G10 as crude futures are registering losses of over 5%. The moves come ahead of Thursday’s Norges bank meeting where they are expected to raise rates by 25bps, in line with the guidance handed down in March. Initial resistance in USDNOK has been breached at 10.7922, targeting a move to the 2023 high of 10.8778.
• New Zealand employment data and commentary from RBNZ’s Orr kicks off proceedings on Wednesday. US ADP employment and the ISM Services PMI are also scheduled. The focus will inevitably be on the subsequent FOMC decision, where a 25bp hike could mark the end of the Fed’s hiking cycle.

US STOCKS: Retraced Some Losses But Energy and Banks Still Weigh Heavily

• The S&P E-mini continues to chip away at its earlier slide in a greater retracement than that seen in Treasury’s paring of gains, although at 4138 is still down -1.1%.
• Energy (-4.1%) leads the declines with WTI holding -5% on the day, followed by financials (-2.4%) which continue to be pinned lower by banks despite a small intraday recovery (SPX banks -3.3%, broader KBW index -4.6%). PACW remains of note, still -24% despite earlier trimming of -40% declines.
• The day’s low of 4105.75 punched through support at the 20-day EMA of 4135.41, opening 4068.75 (Apr 26 low), whilst yesterday’s high of 4206.75 (May 1 high) continued to offer resistance.

COMMODITIES: Risk-Off Sees Crude Slump and Gold Surge

• Macro factors have been at the fore today, as crude oil has slumped 5% for the largest daily drop since Jan 4 and notably before the start of US regional banking issues in mid-March. The majority of declines came with softer than expected US JOLTS labor data not long after the US open with regional banks also sliding and dampening risk sentiment.
• The market reaction was exacerbated coming off low volumes, after yesterday saw the lowest volumes since Dec’22 after Asian and UK holidays.
• WTI is -5.2% at $71.75 off a low of $71.45, clearing support at Apr 28 and Mar 30 lows and briefly $71.76 (61.8% retrace of Mar 20 – Apr 12 rally) to open the round $70.
• Brent is -4.9% at $75.40, clearing $76.52 (61.8% retreace of Mar 20 – Apr 12 rally) to open $75.00 round number support.
• Gold is +1.6% at $2014.84 having jumped as US Tsy yields tumbled and earlier USD strength was reversed. It earlier cleared resistance at $2015.1 (Apr 17 high) before retreating, with a further push higher opening the bull trigger at $2048.7 (Apr 13 high).