MNI US MARKETS ANALYSIS - All Eyes on Payrolls

US TSYS SUMMARY: Payrolls To Set The Tone

A quiet overnight session for Treasuries well within Thursday's ranges as we gear up for the April employment report at 0830ET.

• In the only overnight event of real note, Jun 10-Yr futures (TY) briefly hit session lows in sympathy w Bunds around 0830ET as ECB's Kazaks floated possibility of a slowdown in bond purchases in June. Last down 2.5/32 at 132-19 (L: 132-17.5 / H: 132-21.5).
• The 2-Yr yield is up 0.4bps at 0.1567%, 5-Yr is up 0.2bps at 0.8062%, 10-Yr is up 0.8bps at 1.5771%, and 30-Yr is up 0.5bps at 2.2471%.
• NFPs seen +1mn in April in BBG survey (+1.1mn in MNI Dealer Median), with the unemp rate falling to 5.8% from 6.0% prior.
• In other potential D.C. intrigue today, Pres Biden will discuss the April jobs report at 1130ET, with Treas Sec Yellen doing a press briefing at 1230ET.
• We also get wholesale inventories/trade sales data at 1000ET, and Mar consumer credit at 1500ET.
• Richmond Fed's Barkin appears at 0900ET.
• No supply or NY Fed operational purchases.

EGB/GILT SUMMARY - Edging Lower

European sovereign bonds have traded weaker this morning and curves have bear steepened.

• Gilts have lacked direction and trade close to flat on the day in the aftermath of yesterday's BoE decision to taper weekly bond purchases.
• Bund yields are 1bp higher on the day.
• OATs have underperformed bunds and remain offered with yields 1-3bp higher and the curve 2bp steeper.
• The BTP curve has similarly bear steepened with the 2s30s spread 2bp wider.
• The ECB's Martins Kazaks earlier indicated that a decision to slow bond purchases was possible in June.
• The UK Conservative party won an historic by-election in the long-held Labour seat of Hartlepool, marking the latest setback for the beleaguered opposition.
• Germany industrial production data for March came in stronger on the month (2.5% M/M vs 2.2% survey) but weaker on the year (5.1% Y/Y vs 5.7%).

EUROPE OPTION FLOW SUMMARY

Eurozone:
0RH2 100.37/100.12ps, bought for 4 in 3k
2RZ1 100.25p vs 0RZ1 100.37p, bought the 2yr for 4.75 in 5k
2RH2 100.25^ bought for 27.5 in 3k2RU1 100.37^, sold at 14.5 in 1k

UK:
0LU1 99.75/99.50ps vs 99.87c, sold the ps at 6.25 in 2k

FOREX: EUR Boosted as Market Eyes Kazaks Comments

• EUR/USD saw support all the way higher to 1.2090 early Friday as markets watched comments from ECB's Kazaks, who stated that a decision could be made slow the ECB's bond-buying programme as soon as June, adding that the ECB may not spend the entirety of their pandemic program envelope.
• These comments underpinned early EUR gains, although SEK and NOK remain firmer on the day.
• Separately, GBP trades well, with GBP/USD nearing 1.3930 following regional and by-election results in the UK that showed the Conservative Party firming their lead on the opposition.
• Today's jobs report takes focus going forward, with markets expecting gains of 1mln jobs across April, pressing the unemployment rate lower by 0.2 ppts to new post-pandemic lows of 5.8%.
• The Canadian jobs report also crosses, with CAD continue to pressure new cycle highs. April is expected to have seen job losses in Canada, boosting the unemployment rate up to 8.0%.

FX OPTIONS: Expiries for May07 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1895-10(E1.2bln), $1.2025-40(E2.3bln), $1.2100(E749mln)
• USD/JPY: Y106.60($500mln), Y109.00-10($988mln)
• GBP/USD: $1.3900(Gbp842mln)
• EUR/GBP: Gbp0.8650-60(E625mln)
• AUD/USD: $0.7800(A$1.1bln)
• USD/CAD: C$1.2400-20($938mln)

Price Signal Summary - Equities Stay Firm

• In the equity space, S&P E-minis remain above Tuesday's low of 4120.50. Importantly key support at 4110.50, Apr 20 low remains intact. A break would signal a top and also confirm a break of trendline support drawn off the Mar 4 low. The bull trigger is 4211.00, Apr 29 high. EUROSTOXX 50 futures have tested above the recent high and psychological hurdle of 4000.00. The trend remains up and the focus is on 4023.00, Aug 16, 2007 low.
• In FX, EURUSD is firmer today. Initial resistance is at the trendline drawn off the Jan 6 high. This intersects at 1.2093 with the key resistance at 1.2150, Apr 29 high. Key support and the bear trigger is at 1.1986, May 5 low. GBPUSD is consolidating. The pair remains below 1.4009, Apr 20 high. The break on Apr 30 of support at 1.3824, Apr 22 low highlights a bearish risk. 1.3801, Mar 5 low is today's bear trigger. USDJPY maintains a bullish tone. Attention is on 109.96 next, Apr 9 high. USDCAD major support sits at 1.2062, the Sep 2017 low. It is either the base of a broad range or a double top on the monthly chart.
• On the commodity front, the Gold outlook is bullish and the uptrend has resumed. This has opened $1851.5, 61.8% retracement of the Jan 6 - Mar 8 sell-off. Oil is off recent highs but the uptrend remains intact. The Brent (N1) focus is on the psychological $70.00 level and $71.75, Jan 8 2020 high (cont). WTI bulls are eyeing the key resistance at $67.29, Mar 8 high.
• In the FI space, Bunds (M1) have recently breached 170.05, 76.4% of the Feb 25 - Mar 25 rally. This opens 169.24, Feb 25 low. Short-term gains are considered corrective. Near-term risk in Gilts is still skewed to the downside. The next support and intraday bear trigger is at 127.32, Apr 1 low.

EQUITIES: Stocks Higher Pre-Payrolls

• Equity markets across Europe are in the green, with gains led by Germany's DAX which sits nearly 1.5% higher. Gains are relatively broad-based, although Italy's FTSE-MIB is seeing more modest gains, higher by just 0.2% at pixel time.
• Similarly, in US futures, the e-mini S&P sits around 10 points higher and is now within striking distance of the all-time highs posted late April at 4,211.
• Across Europe, the consumer discretionary sector is at the top of the pile, closely followed by technology and industrials. All sectors are higher, with real estate the weakest, albeit still in the green.

COMMODITIES: Gold Touches New Multi-Month High

• Precious metals remain in favour, with spot gold cresting to touch new multi-month highs at $1823.12 to extend this week's bounce. The 200-dma at $1851.41 remains a key level going forward, and the uptrend will likely face some stiff resistance headed into that level.
• Contrasting with metals markets, oil trade heavy, with both WTI and Brent crude futures in holding patterns just below yesterday's close. The moves in oil come as a new round of talks between Iran, Russia and the West begins, with all parties committing to 'intensify' the process. Russia claimed that all delegations appear prepared to stay in Vienna for "as long as necessary" to achieve the full restoration of the Iranian deal.
• Support for WTI undercuts at the May 4 low of $64.29, while Brent eyes the Monday low print of $66.10.