Markets Snooze as Traders Await Non-Farm Payrolls

The European markets were relatively quiet overnight as many market participants made the May day holiday into an extended weekend. In sector rotation overnight Goldman Sachs raise its view on the European basic resources sector to an overweight from a neutral, cut its view on the European retail sector to an underweight from a neutral, and cut its rating on the European household goods sector to a neutral from an overweight.

In the newspapers, the Wall Street Journal reported overnight that the proposed merger between Rio Tinto (RTL) and BHP Billiton (BHP) is looking less likely. The article notes that on Thursday a key barometer of the odds that BHP's offer for Rio Tinto will succeed hit its worst level since the deal was officially announced in early Feb, as Rio Tinto's market value fell about 7% below that of BHP's offer. According to the Wall Street Journal Yahoo (YHOO) could announce a Google (GOOG) ad agreement within week. The agreement would involve Yahoo carrying search ads from Google. Note that there was speculation on a deal of this nature in mid-April. The Independent wrote overnight that Lloyds TSB [LLOY.UK] is expected to resist pursuing a rights offering. The article also noted that the company is expected to report bigger write-downs at its interim trading statement next week.

In fixed income there was no new supply issued overnight. The Belgian Agence de la Dette said overnight that 2009 issuance will decline by €6-€7B as the result of a more balanced budget, and less redemptions. The Agence de la Dette added that the market can expect a new 10-year in 2009, and noted that it seeks to issue a 30-year bond if demand warrants. According to NISER, the UK is likely to break at least one of its fiscal rules. NISER also expects UK GDP growth of 1.8% in both 2008 and in 2009 The CEO of the British Bankers Association (BBA), according to the Financial Times, said that ICAP's new rate system will not displace Libor as the benchmark for borrowing costs. Recall that ICAP reportedly planned to create a US interest rate system aimed at addressing Libor-related concerns.

All was quiet on the speaker front overnight, with the exception of a few comments from the ECB’s Liikanen. Liikanen said in a newspaper interview overnight that the financial market turmoil is a "big disturbance,” adding that the credit crunch is a large risk for the economy. Liikanen added that straight talk is needed for banks to regain market confidence.

In currency news the Financial Times wrote overnight that speculation that the Euro’s 7-year bull-run was coming to an end intensified on Thursday, pointing out that many economists expect that EU growth has slowed to the point where the ECB will have to cut rates. The International Herald Tribune wrote overnight that the French Prime Minister is seeking support from the US for a common approach to deal with growing concerns about market instability and the weak USD. The French PM is expected to meet with US Treasury Secretary Paulson and Fed Chairman Bernanke. The article also speculates that the French PM may seek help from the US in persuading China to allow the Yuan to appreciate more.

Looking ahead, the focus this morning will rest upon the famed non-farm payrolls data for the month of April, which are expected to show a decline of 75K. While the range of estimates is varied, a recent survey of over 80 economists did not yield any estimates for a positive reading. Following the payrolls data, and the hourly earnings data, March factory orders will be released after the equity market open. Earnings results are expected from a few notables this morning including Chevron (CVX), Duke Energy (DUK), Nortel Networks (NT), and Viacom (VIA.B).

Comments

[himself]

Rather than taking the day off, investors should be pouring money into China. The country's economy is about to explode, and Wu Street will be the next Wall Street. GM and Ford - both in desperate need of sales - already are seeing the potential. Meanwhile, U.S. investors, worried about domestic matters, are missing opportunities in China.