Today's Non-Farm Payroll and US unemployment numbers were a disappointment for the rapid recovery, V type bottom bulls. The unemployment rate was down to 9.7%, a little better than expected, primarily because 322,000 people gave up their job search and dropped from the work force. The aggregate NFP numbers, bloated by 411,000 temporary census workers, masked the paucity of private hires, only 41,000. With the bump from the census numbers now history, and fears that the benefits of the government stimulus is dissipating, the US equity markets headed south, and are now down over 300 in the Dow.
The feature in the early currency trade was new lows in the Euro, as the Hungarians emerged the new country with the sovereign debt problem. This "grave situation" was caused, of course, by the previous administration who had squandered the €20B received to fix the problem in 2008. With European markets in negative territory, and the possible default of Hungarians now a concern, it was no surprise the euro took out the 1.20 level.
The global demand for money, trillions, to pay for current deficits and previous debt issues now maturing, has been a concern. Will the government's need to borrow crowd out the private sector? Perhaps there is another issue to be addressed. Will the borrowing requirements of the US Treasury crowd out some of the European borrowers?
With the flight to safety caused by today's negative news, the US bills, notes and bonds are back in favor. The 10 year US note is down over 20 basis points, to a yield in the 3.20 range. This should make it a bit easier for next week's US auction, only 70B three, ten and thirty year issues, however as a bonus they are offering 27B three and 27B six month T-Bills for a bi -weekly sale of $124B. Today the Italians sold some 10 year paper at 170bp over the German 10 year bund, or 4.28%, a 1.07% premium to the US 10 year notes. Will a global demand by governments for borrowed funds, cause another credit crises?
In the currencies, the big beneficiaries have been the USD and the yen, because they are perceived as safe havens from the ravages of a bear equity market. Markets that close poorly on a Friday normally produce a new wave of week end bears, who are often anxious to sell the Monday market. Misery begets misery and a Dow close under 10,000 should spawn more bears.
No trading suggestions or charts today. Have a great weekend.
Disclosure: No positions
