Halister News

(Bloomberg) -- Non-farm payrolls seen at +190k in Jan. (forecast range +142k to +260k).

• Payrolls m/m change +292k in Dec.
• Unemployment rate seen at 5% in Jan. (range 4.8% to 5.1%)
• Prior three months saw 5% unemployment
  • Trade deficit seen at -$43.2b in Dec. (range -$40b to - $46.2b)
  • Prior trade deficit -$42.37b in Nov.

(Bloomberg) -- Canada’s unemployment rate seen at 7.1% in Jan. (forecast range 7.1% to 7.2%).

• Dec. unemployment Dec. 7.1%
• Net change in employment seen at +6k in Jan. (range -15k to +15k)
• Dec. net change +22.8k

(Bloomberg) -- Above-all-estimates Jan. CPI shows Brazil is facing sticker shock that may push BCB to keep interest rates high to slow inflation, Eduardo Velho, chief economist at INVX Global Partners says in a phone interview.

• Budget crises across country has led governors to raise transport fares and taxes, adding to pressure seen in food prices due to weather conditions
  • “There’s no room for the government to maintain subsidies”, Says Velho, the analyst whose estimate got closest to Jan. CPI of 1.27% vs prior 0.96% among economists surveyed by Bloomberg
  • Higher costs leading companies to increase prices even amid deep recession; “Brazil’s economy is becoming similar to the ’80s crisis pattern,” with stagnated activity combined with high inflation
  • Many companies are closing doors given the prolonged recession; that curbs the local competition, reducing the supplies of goods and services and preventing lower prices despite the weak activity
  • “It’s a stagflation pattern,” Velho said
• Velho forecasts CPI of 7.5% and Selic rate of 13.75%; sees increasing risk of inflation above the estimate, which could make it difficult for BCB to lower its rate
• Reforms such as those on pension regime, law that links minimum wage lifts to CPI plus GDP moves could be way to restore confidence in the economy
  • “A pension regime reform could boost the confidence the same way we saw in 2003 when Lula government raised the primary surplus target”

(Bloomberg) -- “The tiring oil/stocks/yields relationship leaves a lot to be desired from a fundamental flow perspective but the linkage does provide a correlated trading opportunity for those willing to continue to place their trust in it,” independent strategist Marty Mitchell says in note.

• “Markets don’t seem all that attentive to the latest reading on the US labor sector” because they “just cannot shake the high correlation”
• “A stronger than expected number will take the 10yr back toward the 10dma at 1.925% but that may be all that we should expect because thoughts will quickly turn back to the global financial market concerns”
• “A weak number will take yields lower in knee-jerk reaction but look for better selling to develop between 1.79% and 1.75% on the 10yr”
• Other observations from strategist morning notes:
• CRT (David Ader): “Whether for the hawks or the doves, the next few meetings are clearly off the table which means we, in the market, have to digest the data to determine what the Fed might do and, more importantly, wait out the turmoil in risk assets to determine what we should do”
  • “The point here is that ongoing volatility/weakness in those arenas will take their financial conditions and psychological toll and keep a lid on US rates rising”
  • “For now at least, we like the front end relative to the back end and hide behind the skirts of the refunding to justify a concessionary steepening bias,” and “NFP matters, but we think that’s more a trade than a reversal risk”
• FTN (Jim Vogel): “Coming into payrolls, the UST curve and other market indicators still allow for two Fed rate increases this year,” and “a rough read from stocks, for example, might find 1900 on the S&P 500 as a dividing line between 2 and 3 hikes in 2016”
  • “Trading above 1950 corresponds approximately with one hike late in the year,” and “these relationships will shift repeatedly in the weeks leading up to the March meeting”

(Bloomberg) -- VW delays reporting of annual results, AGM.

• New dates will be announced as soon as possible
• Remaining open questions relating diesel emissions

Link to Statement:Link

--ANGELA CULLEN