US Non-Farm Payrolls preview

Okay, so good morning. Friday, 3rd of May, non-farm payrolls day, of course. I'm going to quickly go through then what I've got here to the side of me, which is some of the initial councils that have reported from some of the UK local elections that have been ongoing from yesterday. Then going to talk about HSBC earnings, about the Trump nominee being pulled, and then look at the rough expectations around non-farm payrolls, which will go into greater detail before the release. So at the moment, things are relatively quiet, as is always the case ahead of non-farm payrolls. People typically tend to kind of sit on their hands This is not forgetting as well that, you know, China, Japan are closed, so the Asian session definitely a bit lighter than would normally be the case. So just looking across the charts, one thing that remains quite clearly evident is that since the FOMC that we had in the middle of the week, the dollar has held on to those gains. The DXY, albeit flat though, is kind of keeping the pressure on, I guess, in the case of EURUSD. And cables both pretty flat overall, but again, the kind of the theme here being that if anything, the doves a little disappointed by what the Fed had to say. The fact that they see inflation as transient, kind of of the belief then that they're on the right policy kind of path at the moment, keeping the dollar buoyed for the moment. Equities obviously have had a bit of a pullback, but you know, technically they found a bit of support more recently. In the same case really with oil as well, although that does remain something I'd be continuing to watch throughout the session as we progress. You've got the Baker Hughes rig count of course as well coming out later on in the session. Getting straight into it then because probably going to be pretty short on my side, it's been mainly what Sam's got to say on that, on the technical setup. And so this is the picture that we're looking at, this is the net change in seats So still a lot of results to come in, but you get the idea already. And this isn't really that surprising, you know, just as I said, Cable's just printing lows, but it's been very little reaction really in Cable. And that's because this is really expected, and that is that the Brexit situation where, you know, this kind of the impasse that we've been at, they're kicking the can down the road to now October 31st has made people very dismayed by the handling of Brexit. And this isn't by the Conservative Party, this is by the opposition as well. You know, the lack of a credible, kind of, better way forward from the opposition with Jeremy Corbyn trying to basically sit on the fence and play both sides has kind of really gone against him as well. So Basically what we've been seeing then are heavy defeats for the Conservative Party, as you would expect, and also though losses for Labour, which has translated into then benefit for the Liberal Democrat Party. They've seen the biggest gains thus far, and then the Independents as well. So again, I wouldn't say much of this is, is shocking. The Liberal Democrats though are expected to make a net gain more than 500 seats, while the Green Party also appears to be increasing its vote share as well. So will be interesting, I guess. Thinking about this on the way in, I was thinking, well, if Labour are performing badly as well, it's, you know, is this enough then of a kind of a push for Corbyn to really commit to some more definitive course of action? We kind of know what the Conservatives are or what Theresa May at least wants. You know, the way that this is heading though is that if we go to the— and if we do have the European elections and they go forward then on what, the 22nd of May, you know, the Conservatives are going to get hit badly. And probably the biggest disrupting factor of course is going to be Nigel and his Brexit Party, of which will probably gobble up a lot of those kind of disenfranchised Tory supporters. So yeah, not going to talk anymore about it, to be honest, because from a market point of view, I don't think it's surprising. And I think that's largely reflected in the pound. Other things that we have had, HSBC. So if you are looking at the FTSE and the cash open, about 15 minutes, they did trade their shares higher in trade in Hong Kong. So the mainland is shut for for Labor Day, but Hong Kong is open. So a couple of things just to show you here. As you can see from the graphic, HSBC's latest earnings were the best in 14 quarters. So pretty solid numbers. They were driven by faster than expected revenue growth that increased at triple the pace of adjusted operating expenses. So the shares were up roughly about 3%. Uh, let me just message the guys at Ranscorp if there's a pre-market call. I'll come on after the brief and I'll, and I'll update you if there is one, but I would imagine it would be probably a little less punchy than that, but to the upside at the open. Um, their adjusted pre-tax profit rose 9.5% in the first quarter to $6.35 billion. That was above expectations of $5.69 billion on the street. The adjusted revenue rose 9%. That was also above expectations. So yeah, I guess it's this idea um, that the, the top line is way outpacing then the level of expenses. One of the key metrics, of course, of running quite a diversified bank like HSBC. Um, otherwise, other things that I thought I'd point out to you, I thought this was interesting, but in my opinion quite expected. So this was that Fed nominee Stephen Moore If you remember, you've had two people put forward— trying to remember the name of the other chap that pulled out two weeks ago. Both have been proponents of kind of further easing at the Federal Reserve. The first guy basically lost a lot of support because of sexual harassment claims, and then this guy who was looking to be very much aligned with delivering what, what Trump has been looking for, which is interest rate cuts, He actually— a bit confusing actually— yesterday he spoke on Bloomberg basically in the afternoon, and he said, "Trump wants me, I'm all in." And then about an hour later, it looked like Trump pulled the trigger and basically said, "No, I'm not running." So to me, this is just, you know, Trump 101 political managing of the situation. I did tweet this yesterday, but you if you didn't catch it, basically it's the same point I've made before. Objective done as far as Trump is concerned. Whether Fed policy now delivers and their course of action to not be dovish is the right decision to make and the economy stabilizes and if anything, you know, growth continues, then that's a good thing for Donald Trump. If now that decision from the Fed and Powell was wrong, well then Trump now can say, well, you know, these guys who were never going to get in in the first place, he can still say to the public, "Well, it's not my fault, it's their fault. I gave them the solution, they didn't want it." So yeah, it's a get-out-of-jail-free card for Donald Trump is what I'm calling it. And thank you, Andy, the previous candidate was called Herman Cain. Alright, so other than that, it is pretty quiet. To update you, no real further news on the trade negotiation side between China and the US. Vice Premier of China is due to head to Washington with a 100-member delegation. So that's a pretty big posse they're bringing over to Washington. That's even bigger than Sam North when he's hitting New York City, that kind of size. So that's impressive. But obviously a lot of goodwill at the moment to try and get this deal over the line. People familiar with the matter this morning in Bloomberg saying there's still difficult issues that remain unresolved, but both sides at this point at least are still committed to getting the deal done. So again, I'm kind of reticent to really buy into the fact that this deal is, is concrete, going to be signed just yet. But again, it's going to be a lot of movement probably on the discussions given the size of the, the group going to Washington for further talks next week.

All right.

So other than that, let's have a look at payrolls. And I just wanted to kind of paint a bit of a picture. We'll go over this again ahead of the release at 1:30, of course, in more detail. But to give you a bit of a summary and flavor, Obviously we track various different economic indicators before we go into the release of the, the BLS report, and that gives us a bit of an insight as to what would the, the general employment conditions in the country, uh, ahead of the, the broader figure we'll get in Non-Farm. And so this is ADP employment change, and this came out earlier in the week, of course, and it kind of smashed expectations. In fact, it was the highest reading since February Well, actually here it was the highest reading since— excuse me— July of 2018. As you can see here, significant jump though, as you can see, 151 to 275. And if this acts as any precursor, then obviously that could, could lend its hand to an upside surprise to the headline print today. Other things to consider on arguments for stronger payrolls Jobless claims 4-week moving average has declined. Continuing claims fell to 1.67 from 1.71 million. And consumer confidence that we saw has rebounded quite sharply as well in the month of April. On the flip side though, it's not all been, um, one-dimensional. University of Michigan Consumer Sentiment Index has declined. There's been a sharp drop in the employment constituent that we saw earlier in the ISM, and Challenger layoffs, i.e., job cuts across different sectors in the US, was up about 10%. So, you know, there's various different measures here that are somewhat in conflict. The one thing then that I would say probably for the headline reading is that it would kind of lend its hand to a roughly in-line consensus-type reading. It would be a surprise, I think, to see large fluctuations just given the data at least that we've seen in the buildup to this. The headline is expected at 185. We have, we have had very large fluctuations, of course, over Q1, but I guess one thing is there's a lot of probably excess noise around this specific data set, just given the government shutdown that we had for, what, over a month period, the longest on record. And that, that has impacted this to make it quite difficult number to really get a precise or accurate reading. So I would say today's number probably is the first genuine figure that we've had that probably X's out a lot of that noise. So with that, expectations are at 185. So that puts us pretty much— 185, I'd say, is bang on the average of the last 12 here. If we were to draw a dotted line straight through the middle, we've got a range though of 17 to 273, uh, depending on how, uh, kind of pessimistic, optimistic the analysts are on Wall Street. That will give you your kind of distribution. On the other factors, of course, that, that come into this, um, the employment situation overall, uh, maintaining relative strength in the US. Um, unemployment is expected to remain at 3.8%. However, there is a low end of the range at 3.6. I mean, let's just jump to the unemployment range. If it came in at 3.6, well, you know, we're just getting further through that low that we had kind of here in, I guess, the late '90s, early noughties. That was put us back down to basically the lowest level since the late '60s. Um, that, as far as the Fed are concerned, with General economic growth should then mean that this average hourly earnings number picks up. Now, if you think about the consumer confidence number we had just the other day, it's rebounded back up to very strong levels. So if people have, you know, employment is high, there's less available workers. If anything, if wages start to go up or show signs of improvement, is that going to attract more people into the workplace as well? That will help then further economic growth. And so yeah, in terms of this, this figure, the average hourly earnings, I think, will be, will be quite key, as it always has been the case. How much overall impact do I think payrolls is going to have today? Well, I don't want to kind of rain on people's parade in the intraday market who wait for these types of big events, but quite frankly, from a policy point of view, I think this non-farm payrolls doesn't mean anything. Um, does it mean it's going to create short-term movement and volatility in the market? Absolutely it can, and it probably will. Does it have any real ramification for where we are from what the Fed say on Wednesday? I would say close to none, not unless you get some, you know, negative print on the wage number and it's like heavily negative on the month, uh, it's expected at, let's say, the month-on-month on the average earnings at 0.1. The bottom end of the range is 0. If we got a -0.2, would be something which possibly could draw or raise a few eyebrows. But otherwise, this is more about an isolated event that will cause market movement that can be tradable. If tackled and in the right way from a risk perspective, and also if the numbers align in a way that creates a more directional reaction, whether immediate or thereafter. Otherwise, things I'd be interested to see really as we go into what is in the UK an extended weekend is I'm quite interested to see how oil performs Um, if you remember, I think it was the end of last week when we were quite trading quite heavy into the close. Given the movements we've seen this week, I'd be interested to see whether or not we might get a bit of a repeat of that. Also in the equity space, with some of this pullback for retesting some of these lower levels again, would be something I potentially, from a sentiment point of view, be interested to see. But obviously we need to wait for payrolls and how that comes out as well, to ascertain whether or not that will play out. All right, other than payrolls, uh, you get the advanced goods trade balance coming out of the US, but that's kind of secondary fare to the headline payrolls figure. You've also got ISM non-manufacturing coming out in the afternoon, but again, this will play second fiddle to the, to the jobs data, uh, coming out in the European morning though. Uh, one thing that is— well, two things that are interesting. Let me just pull my calendar up so I can show you. So before the show begins in the US, we do have the UK service PMI number. Now, UK economic data has been fairly benign in terms of its ability to move the pound, and that's understandable just given a lot of the political focus ongoing, but the service PMI is probably one of the major tier numbers that we get from the UK given the composition of our economy. So if you were looking at cable, I definitely would be waiting for this figure and then looking to potentially take action thereafter should the situation present itself. Just looking briefly at cable again, I'll leave Sam to go over in more detail, but we are retesting quite an interesting area kind of around here at the moment, which was the low print from yesterday's session and also the low from, uh, the 30th as well. And definitely, given the fact that, you know, if we look at the expectation here, it is for it to remain pretty much just on the cusp of an expansion. This is pulling us out of a contractionary print that we had last month, but whether or not that remains in contraction will be quite interesting. And then you've got the CPI flash reading coming out of the eurozone as well at 10 o'clock. But remember, the German state CPIs did bump up only a couple of days ago, and so the expectation here is this also follows suit from the previous reading and increases by 0.2% on a year-on-year reading. But something to look out for from a speaker's point of view. This afternoon, Fed's Evans, Fed's Clarida, Fed's Williams. So quite interesting then, after the fact that you had the, the FOMC of course midweek, and there was a bit of a hawkish response to that that we've seen over the accompanying few days. These are all voting members, all three. The first two are neutral, Williams a bit more hawkish. So definitely, if there is any need for the Fed, if they feel deal to kind of realign markets' expectations of how they've reacted since that event midweek from the Fed. These guys' speeches will be quite important. So if you're looking at the FX market and the dollar movement, I would be keeping an eye out on this. So 3:15, 4:30, predominantly if you're trading UK European hours. Now you've also got Fed's Bowman, but that's not until later. And from an earnings point of view, we've had HSBC, of course. There's no real major big US names if you're trading the index futures point of view. All right, with that, let me hand you over to Sam. Um, I will see you in the chat room. I'll be back on, of course, to cover Non-Farm in full. But as a reminder, the Amplify office will be closed on Monday. I probably will, though, do a week ahead or look ahead for the of the week on Monday from home. So hopefully I'll see you there. All right, take care, guys.

Hi guys, hope everyone is, is, uh, is doing well. Happy non-farm payroll day. As you see here from, uh, Anthony Cheung, pound is pushing to its lower point. I mean, the dollar index on the higher the day, so a couple of those pairs just getting excited early morning. But would reiterate what he says likely to be a quiet morning. Usually is that way ahead of the release into the afternoon. I know we do have that data out, UK 9:30, so always worth having a look at that, being the services number. Let's have a quick look in a bit more detail for, for the pound, where we could be looking going into the back end of the week. Obviously the, the trend line we talked about most briefings on on, on that. Having broken through, the pound has seen a bit of a relief rally, but to the high, you know, we are down now, uh, a point or so from that as it just sort of recovers a bit. This area that is trading now is pretty important, the low from yesterday, but also the, the higher point before that final push that we had back on the 30th. So somewhere I would keep an eye on, to be honest, around here. Was also a good sort of price action point on the 23rd. If that was to go, and really this would be something I'd be more confident in wanting to trade if it did happen later in the afternoon when the volume picks up a bit, um, then you could see it could open up a touch. But for now, I wouldn't really be wanting to get too excited to the upside, which, you know, does seem a fair whack away, but always worth, I think, when we are in this case just trending lower last couple of days. If it was higher, obviously the opposite. This way you've got, you know, two highs. Where could we get that third one? Is there going to be a trend line on that? What's the reaction? And then go from there. It looks like that could probably come in around either this sort of previous high that we had yesterday afternoon or around the pivot as well. So something to, to keep an eye on. But with that dollar strength, you're also seeing that across the board with the euro here, just bringing that into picture, just pushing to its low, as is Aussie dollar as well. But nothing too worrying, I think, for now. Having a look at the euro, that 22-month low not too far away. And if we were to have a really strong reading in the afternoon, then yeah, why can't we get that? But yeah, it's done that same thing thing that it has done multiple times here. The euro, just when you think it's getting away, we trend higher for, you know, a week or just a bit more, then we get that breakthrough. Similar, you know, plenty of times. So I'll just put this onto, you know, that longer term chart. You can see here, every time you get that just trend higher— here's one that took a bit longer than a week— then you get that real push through. Similar here as well. So can't be too surprising to see us, uh, back lower despite, um, a couple of data points which got people relatively excited for the euro that we might be seeing that recovery, but not just yet. Speaking of the dollar, uh, and with gold, although not too affected today, we did have a test of that, that trend line yesterday, false break of it. So we'd be interesting to keep an eye on that come the end of the week. Um, to see where we are trading. If I just draw that up here, you can see the brief test of that, uh, although it did snap back. Also, for those that keep an eye, 50% fib from that low of 2018 to the high of 2019. So as an area, obviously very important, uh, one to keep an eye on. Also the high back in the beginning of December. So where we close above or below that today on Friday will be important for this level. We saw last Friday the failure to close back above this area of resistance really led to the sentiment to the downside, and every opportunity to sell higher up this week has come to fruition. So one to keep an eye on there later on for gold, but we'll go through the charts at a closer time to non-farms, of course. Equities, which were coming down, uh, yesterday, or although you can see if I just put the pivots on, decent recovery into the back end of, of the session. And we're now, well, just above midpoint from yesterday's high to low. Relatively choppy trade though, I have to say. I think I wouldn't really fancy getting involved in the in this market unless we were to clear the highs of yesterday, and then you've got to imagine sentiment is really changing. But if we were to come back even down to pivot, it looks quite messy. I think the only opportunity I like the look of, of maybe getting short, would be if we were to start developing some sort of trend line, or the momentum picks up and that low of the day marks up below the pivot was to go. But I mean, looking at this, it— I don't know, it doesn't really interest too much at the moment. But as usual on non-farm, it's not a case of wanting to, to get too much, uh, too much in the way of getting involved early on. You can see even this, you know, short-term trend line break there, nothing really happening from that. Oil, with S&P and equities in general coming down, you've also seen this with, uh, with oil as well. If we go back to last Friday, we had a really decent push lower Uh, to the upside, if we can get there, I wouldn't mind, uh, a short around 62.29, what was on the futures anyway. The low there, the 26, looks like a decent level to potentially get in. And we can see any retracement from that Friday move up towards those levels that we had key resistance from the 9th all the way through to the 17th of last month, how strong a resistance that was once we broke through. So it's something to keep an eye on there for oil. But in a morning where not expecting too much, probably best to sort of sit on your hands, I'd say. Just have a quick look at the overall picture to see if anything else is moving too much. DAX— comment in the chat here, we just had Reuters quoted sources with Saudi Arabia's oil market policy as saying that Saudi oil output could edge higher in June but still set to stay within OPEC quota. So one to keep an eye on there, oil traders. I think that's just come out. Has that just come out now? About half hour ago. Half hour. It will be interesting to see when volume comes in how they react to that. The DAX limited. I think that's a sign if you're not getting a pretty pushed just off the, uh, the 8 o'clock, uh, open, then it's going to be a quiet morning. So sit on your hands. Maybe if we just have a quick look over that calendar again, you might get, uh, something in a way of a reaction, an opportunity, 9:30, 10, but then it's going to drift until we come into that afternoon with the, with the payrolls as well. Any questions, as usual, please do, uh, let us know. We'll be on the mic throughout the, the morning, and then of course for non-farm payrolls into the afternoon. But if I don't speak to you in, in that time, I hope you have a good trading day and a good bank holiday weekend.