CFD Markets News and Forecasts — 08-03-2019

Statistics Canada reported on Friday that the number of employed people rose by 55,900 m-o-m (+0.3 percent m-o-m) in February, exceeding economists’ forecast for a 300 increase and after an unrevised advance of 66,800 in the previous month. 

Meanwhile, Canada's unemployment was flat m-o-m at 5.8 percent as the number of people searching for work held steady. Economists had forecast the reading to stay at 5.8 percent. 

According to the report, full-time employment increased by 67,400 (+0.4percent m-o-m) in February, while part-time jobs declined by 11,600 (-0.3 percent m-o-m).

In February, the number of private sector employees climbed by 31,800 (+0.3 percent m-o-m), while the number of public sector employees grew by 8,900 (+0.2 percent m-o-m). At the same time, the number of self-employed increased by 15,100 (+0.5 percent m-o-m) last month. 

Sector-wise, there were more people working in professional, scientific and technical services (+18,000 in February), public administration (+14,000), natural resources (+8,000) and agriculture (+6,000). At the same time, there were fewer workers in accommodation and food services (-14,000), as well as transportation and warehousing (-11,000).

On a year-over-year basis, employment rose by 369,000 (or 2.0 percent), reflecting increases in both full- (+266,000) and part-time (+103,000) work.

U.S. stock-index fell on Friday as February jobs report badly missed expectations, stoking concerns about a slowdown in domestic economic activity.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

Exxon Mobil (XOM) downgraded to Market Perform from Outperform at Cowen; target lowered to $75

The U.S. Labor Department announced on Friday that nonfarm payrolls increased by 20,000 in February after an upwardly revised 311,000 gain in the prior month (originally an increase of 304,000). 

According to the report, employment continued to trend up in professional and business services (+42,000 jobs), health care (+21,000), and wholesale trade (+11,000), while construction (-31,000) employment declined.

At the same time, the unemployment rate fell by 0.2 percentage point to 3.8 percent in February, which was the lowest jobless rate since November 2018. 

Economists had forecast 180,000 new jobs and the jobless rate to fall to 3.9 percent. 

The labor force participation rate remained at 63.2 percent in February, while hourly earnings for private-sector workers rose 0.4 percent m-o-m (11 cents) to $27.66, following an unrevised 0.1 percent m-o-m gain in January. Economists had forecast a 0.3 percent m-o-m advance in the average hourly earnings. Over the year, average hourly earnings have increased by 3.4 percent. 

The average workweek decreased by 0.1 hour to 34.4 hours in February. Economists had forecast the average workweek to be unchanged at 34.5 hours.

The Canada Mortgage And Housing Corp. (CMHC) reported on Friday the seasonally adjusted annual rate of housing starts was 173,153 units in February, down 16.3 percent from 206,809 units in January. 

Economists had forecast an annual pace of 205,000 for February. 

According to the report, urban starts tumbled by 18.0 percent m-o-m last month to 155,663 units, as multiple urban starts plunged by 20.2 percent m-o-m to 116,284 units, while single-detached urban starts fell by 10.6 percent m-o-m, to 39,379 units. At the same time, rural starts were estimated at a seasonally adjusted annual rate of 17,490 units.

• No one knows what will happen if my deal gets rejected
• The only certainty would be ongoing uncertainty if MPs reject my deal
• We must leave the EU
• We must keep our precious union of the 4 countries Of the UK intact
• Not in the EU’s interest for Brexit backstop to be permanent 
• UK government still in talks with the EU on legal changes to the deal
• Brexit will not affect our commitment to Irish Good Friday Agreement
• EU also has a choice to make on Brexit deal 
• Now is time for the EU to act
• Brexit delay could lead to the EU insisting on new conditions
• Brexit Delay could mean a possible second Brexit referendum 
• A delay could lead to a form of Brexit that people did not vote for
• Chances of the second referendum have grown since January
• MPs face historic choice next week on Brexit 
• Compromise is necessary to bring the country back together
• Government policy is to leave the EU with a deal

The White House is expected to unveil a budget on Monday that does not balance, said CNBC, citing two people familiar with the plans.

According to the report, the revenue shortfall is particularly notable as the budget is also expected to project the economy will grow at an annual rate of 3 percent, higher than many private forecasts. Achieving 3 percent growth has become a mantra within the administration, however, with officials continuing to argue the expansion is being fueled by the Republican tax cuts.

The deficit would also persist despite the administration's plans for steep cuts in discretionary programs outside of the Defense Department. In an op-ed last month, Acting Budget Director Russ Vought said the administration will seek a 5 percent cut to all other federal agencies. A person familiar with the budget said this cut will be calculated from the caps on spending outlined in the Budget Control Act.

• May is working incredibly hard for a Brexit deal
• No current plans for May to go to Brussels over the weekend
• But May will continue to speak to EU leaders over the weekend

• EU has made a lot of compromises already and the UK has offered nothing for further compromises
• It is a question of what the UK is willing to offer to the EU rather than the other way around
• Backstop сould go back to just covering Northern Ireland 
  
• UK government is going against the majority in Northern Ireland who support the backstop

• EU has offered ideas on reassurance for Britain on the Irish backstop, has nothing to add

According to analysts at Nordea Markets, the trend of US NFP is likely to come down somewhat as the pace of the economic expansion is slowing.

“Consensus is 170k new jobs in February. The unemployment rate rose in January due to the government shutdown. With this effect vanishing, we expect the rate to plummet in February. Consensus if for wage growth at 0.3%m/m and 3.3%y/y. With labour shortage being visible across industries, we believe wage growth will continue its upward trend going forward.”

Cristoph Rieger, Commerzbank strategist. says that the downgrade of the ECB's economic projections will not be the last. He also seeing 10-year German bond yields falling to 0.4% by the end of next year; lower from the previous forecast of 0.65%.

"Later this year, when the ECB needs to shift the forward guidance further into 2020, we thus expect it to implement a tiered rate mechanism, granting banks allowances for excess reserves that are not subject to the then still prevailing -0.40% depo rate." Rieger said.

According to the report from Hellenic Statistical Authority, the Overall Industrial Production Index in January 2019 recorded an increase of 3.4% compared with January 2018. The corresponding annual rate of change of the Overall IPI in January 2018 was -1.2%. The seasonally adjusted Overall Industrial Production Index in January 2019 recorded an increase of 1.5% compared with December 2018.

The 3.4% increase of the working day adjusted Overall IPI in January 2019, compared with the corresponding index in January 2018, is due to the annual changes of the sub-indices in the following industrial sections:

1. Increase of:  

• 0.2% in the Manufacturing Production Index. The increase was the result of the annual changes of the sub-indices in the following 2-digit divisions: tobacco products, printing and recording services, basic pharmaceutical products and pharmaceutical preparations, repair and installation services of machinery and equipment.  

• 21.9% in the Electricity Production Index.  

• 2.1% in the Water Supply Production Index.

2. Decrease of:  

• 32.1% in the Mining and Quarrying Production Index. The decrease was the result of the annual changes of the sub-indices in the following 2-digit divisions: mining of coal and lignite, mining of metal ores.

British employers held off from hiring permanent staff in February, adding to signs of growing nerves ahead of Brexit in the country's otherwise strong labour market, a survey of Recruitment and Employment Confederation and accountancy firm KPMG showed.

The permanent jobs index of the survey edged up to 50.0, the dividing line between rising or falling staff levels. But February's reading was the second-weakest since the shortly after the Brexit referendum in June 2016 following January's slump to 49.7.

"Overall, the labour market has been incredibly resilient over the last couple of years as employers have opted to hire more permanent and temporary staff rather than invest in long term productivity gains," James Stewart, KPMG vice chair, said.

"However in 2019 Brexit uncertainty is having an opposite and chilling effect on the jobs market, with firms reassessing their level of risk," Stewart said.

NAB Research discusses NZD outlook and adopts a neutral bias in the near-term.

"The NZD continues to track sideways. On rounded figures a range of 0.6650-0.6950 has been in play since the start of November.  Risk appetite, commodity prices and NZ-US rate spreads are the factors underlying our short-term NZD model, for which our model estimate has crept up to around 0.6850 – close enough to the spot rate to suggest that the NZD is fairly priced. With a fairly uneventful economic calendar over the next two weeks, it’s hard to see any near-term domestic forces impacting the currency. The next key release is Q4 GDP data on 21 March. We also can’t see any near-term global catalysts to break the NZD out of the range. A US-China trade agreement looks increasingly likely and should be well-priced by now, so we aren’t expecting much of a sustained NZD reaction. Our forecasts remain anchored around 0.67-0.70," NAB adds.

• new tltros will not include mortgage lending

• ECB has time until september to agree tltro details

• ECB acted pre-emptively, reaction was needed

According to the report from Istat, in January 2019 the seasonally adjusted industrial production index increased by 1.7% compared with the previous month. The index measures the monthly evolution of the volume of industrial production (excluding construction). The percentage change of the average of the last three months with respect to the previous three months was -1.8.

The calendar adjusted industrial production index decreased by 0.8% compared with January 2018 (calendar working days in January 2019 being the same as in January 2018).

The unadjusted industrial production index decreased by 0.9% compared with January 2018.

According to a recent study by researchers at the Chinese University of Hong Kong and the University of Chicago, China over-reported its economic growth between 2008 and 2016 by an average of 1.7%.

The discrepancy came from local governments who are rewarded for meeting growth and investment targets, the authors say in a draft paper published by the Brookings Institution. The Beijing-based National Bureau of Statistics, knowing such manipulation well, has been adjusting the local numbers but hasn’t done so sufficiently since 2008, authors Wei Chen, Xilu Chen, Chang-Tai Hsieh and Zheng Song wrote.

They instead use numbers such as tax revenue, satellite night lights, electricity consumption, railway cargo flow, exports and imports -- less likely to be fudged, to predict the actual gross domestic product of the world’s second largest economy. "The revised numbers indicate that the slowdown in Chinese growth since 2008 is more severe than suggested by the official statistics,” they wrote.

Karen Jones, analyst at Commerzbank, suggests that the USD/JPY pair is downside corrective near term and is currently selling off to the 20 day MA at 111.01 and there is potential for the 109.82 uptrend but this should hold the downside.

““Immediate resistance is 112.23, the 6 th December low, the 112.43 55 quarter moving average and recent high at 113.71. We have a 5 month resistance line also at 113.18. It is underpinned by the 20 day MA at 110.95 and the near term support line at 110.91 and this guards the base of the channel at 109.82. While above here we will assume an upside bias.”

According to analysts at Danske Bank, the key focus today will be the US labour market report.

“We think average hourly earnings rose +0.25% m/m in February, which means an increase in the annual growth rate to 3.3% y/y, up from 3.2%, while we expect the change in nonfarm payrolls to come in at 190k. Regarding nonfarm payrolls, it seems employment growth has reached its high and has stabilised around its current level of 1.7% y/y. At the moment, the labour market is still strong, but in our view it is important to keep an eye on deceleration in employment.”

• Decision to launch TLTRO is due to need for careful preparation

• Latest ECB move is meant to send expansionary signal

According to the report from Insee, in January 2019, output increased in the manufacturing industry (+1.0% after +0.4% in December) as well as in the whole industry (+1.3% after a stability).

Manufacturing output went down over the last three months (-0.3%), as well as in industry as a whole (-0.4%). Over the last three months, output decreased in “other manufacturing” (−0.9%), in mining and quarrying, energy, water supply (−0.9%) and in the manufacture of coke and refined petroleum products (−5.0%). It diminished sligthly in the manufacture of machinery and equipment goods (−0.3%) and in the manufacture of food products and beverages (−0.2%). Conversely, it grew in the manufacture of transport equipment (+2.5%).

Manufacturing output of the last three months diminished compared to the same three months a year ago (−1.1%), as well as the output in the whole industry (−1.0%).

Over a year, output also decreased in “other manufacturing” (−1.3%), in the manufacture of food products and beverages (−1.6%), in the manufacture of machinery and equipment goods (−0.9%), in coke and refined petroleum products (−7.9%) and in mining and quarrying, energy, water supply (−0.4%). On the contrary, it increased in the manufacture of transport equipment (+1.0%).

Karen Jones, analyst at Commerzbank, explains that the EUR/USD pair has broken down from the base of the range at 1.1216 as it has sold off to the 61.8% Fibonacci retracement of the 2017-18 advance at 1.1186 and while this may hold the initial test, there is now a considerable amount of resistance above the market extending up to the 200 day MA at 1.1498.

“Below 1.1185 lies the 1.1110, the May 2017 low and the 1.0814/78.6% retracement. Rallies will find initial resistance at 1.1315 the 20 day MA, which guards the 1.1420 end of February high and the 1.1441 downtrend.” Jones said.

According to the provisional data from Federal Statistical Office (Destatis), price-adjusted new orders in manufacturing had decreased in January 2019 a seasonally and calendar adjusted 2.6% on the previous month. For December 2018, major orders were reported subsequently. Revision of the preliminary data resulted in an increase of 0.9% for December 2018 compared to November 2018 (provisional: -1.6%). Price-adjusted new orders without major orders in manufacturing had decreased in January 2019 a seasonally and calendar adjusted 2.5% on the previous month.

Domestic orders decreased by 1.2% and foreign orders fell by 3.6% in January 2019 on the previous month. New orders from the euro area were down 2.6%, new orders from other countries decreased 4.2% compared to December 2018.

According to the report from Customs General Administration of China, China's exports tumbled the most in three years in February while imports fell for a third straight month, pointing to a further slowdown in the economy despite a spate of support measures.

February exports fell 20.7% from a year earlier, the largest decline since February 2016, customs data showed. Economists had expected a 4.8% drop after January's unexpected 9.1% jump. Imports fell 5.2% from a year earlier, worse than analysts' forecasts for a 1.4% fall and widening from January's 1.5% drop. That left the country with a trade surplus of $4.12 billion for the month, much smaller than forecasts of $26.38 billion.

Analysts warn that data from China in the first two months of the year should be read with caution due to business disruptions caused by the long Lunar New Year holidays. But many China watchers had expected a weak start to the year as factory surveys showed dwindling domestic and export orders and the Sino-U.S. trade war dragged on.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1351 (2947)

$1.1302 (1807)

$1.1256 (942)

Price at time of writing this review: $1.1203

Support levels (open interest**, contracts):

$1.1171 (4231)

$1.1140 (2443)

$1.1096 (2089)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date March, 8 is 105740 contracts (according to data from March, 7) with the maximum number of contracts with strike price $1,1400 (6275);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3203 (2717)

$1.3159 (1415)

$1.3123 (4035)

Price at time of writing this review: $1.3093

Support levels (open interest**, contracts):

$1.3058 (1420)

$1.3030 (1355)

$1.2992 (873)

Comments:

- Overall open interest on the CALL options with the expiration date March, 8 is 39484 contracts, with the maximum number of contracts with strike price $1,3100 (4035);

- Overall open interest on the PUT options with the expiration date March, 8 is 34007 contracts, with the maximum number of contracts with strike price $1,2700 (1888);

- The ratio of PUT/CALL was 0.86 versus 0.85 from the previous trading day according to data from March, 7

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.