Notes From Underground: Tomorrow’s Unemployment Release Is a Meaningless Event, UNLESS …

After today’s violent market reaction to a wounded Mario Draghi (more on that later),the consensus numbers for tomorrow’s U.S. jobs data will render the December interest rate rise by the FED a certainty. The STREET is estimating  around a 205,000 increase in nonfarm payrolls and a 0.2% increase in the very important average hourly earnings (AHE). IF PAYROLLS ARE BELOW 100,000 or IF AHE IS FLAT OR NEGATIVE THEN THE FOMC MAY BE RETICENT TO RAISE RATES AT THE DECEMBER MEETING. A gigantic upside number of more than 300,000 would not be big enough to increase the possible rate rise or even change the Fed’s sense of raising faster than the market already anticipates. It is definitely a one and done until some of the present uncertainty in the global financial system clears. This is a very reluctant move by the FED, especially now that the Germans have increased the pressure on Mario Draghi and the ECB.

As much as the global equity markets are synchronized, the EUROPEAN AND U.S. markets showed their symbiotic relationship as being very as important when the lack of a monthly increase in ECB QE purchases caused yields to rise in Europe, which resulted in a massive sell-off of 10- and 30-year Treasury debt. If the ECB is not increasing monthly purchases by as much as the market anticipated then there will be less cash available for purchases in other sovereign debt issues.

KEY: The ECB caused the world to rethink much of its consensus as the VOTE AGAINST DRAHGI. It is rumored that the Germans antipathy to more QE led to FIVE VOTES AGAINST EXTENDING THE QE DURATION AND THE CUTTING OF RATES ANY FURTHER. Bundesbank President Jens Weidmann has gained his voice and with Chancellor Merkel’s popularity declining look for others in Germany to begin to raise their voices against the financial repression being cast upon German savers. BUT BE VERY CAREFUL TRADING THE EURO AND EUROPEAN DEBT BECAUSE IT IS EARLY IN THE MONTH AND THE ECB HAS A GREAT DEAL OF AMMUNITION (or 60 billion EUROS of assets). THE DRAMATIC DROP IN EUROPEAN BOND FUTURES MEANT THAT THE ECB DID NOT TRY TO STEM THE RISE IN YIELDS. WHY? Because Draghi wanted to punish the supposed FIVE NO VOTES that thought a failure of increased QE was going to do grave damage to financial markets.

Also, why should the ECB try to catch a falling knife when it always believes in causing pain to speculators. AGAIN, I WARN ABOUT THE ECB’S INTERVENTION POLICY AND ITS ABILITY TO DISRUPT MARKETS. On November 24, Bloomberg News posted a very significant article, “ECB SAYS QE PROGRAM To BE Suspended Over December Holiday Period.” The opening sentence is critical: “The ECB will step up its asset purchases in December to compensate for an almost-two-week pause over the holiday period.” Further, “… purchases during the Nov. 27 to Dec. 21 will be somewhat front loaded to take advantage of the relatively better market conditions….” Any day of increased purchases will result in bond, equity and dollar rallies. Volatility will unsheathe its sword  in a market subjected to holiday conditions. Stay lean and mean and don’t be married big ideas … YET. But stayed tuned to NOTES FROM UNDERGROUND for further changes in the financial rubric.

***As time marches on, European landscape is only going to get more muddled. GO BUY A COPY OR TWENTY OF THE ROTTEN HEART OF EUROPE BY BERNARD CONNOLLY FOR SALE FROM AMAZON AT $8.00 or directly from me for $10.00 including shipping. It will help bring some clarity.

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6 Responses to “Notes From Underground: Tomorrow’s Unemployment Release Is a Meaningless Event, UNLESS …”

  1. Rob Syp Says:

    If the main theme of markets is to inflict as much pain on as many participants as possible is that why Sir Mario had the Euro shoved right down his throat yesterday? He would be the main benefactor of a parity Euro vs. the Greenback and the market said otherwise, Yesterday was another reminder that no one is bigger than the market.

    What a great day to be long!

    Looking at the Euro chart the shorts became complacent and the rubber band snapped back. Turn a Euro chart upside down and it’s like the run up in S&P’s on a day when every sells and runs to the exits.

    Thank god the markets can still provide cathartic moments.

  2. Rob Syp Says:

    Ms. Yellen knows her day is coming too…. that’s why “No One Here Gets Out Alive” is the title to Jim Morrison’s biography.

  3. yra Says:

    Rob–Mario may have stayed off the market yesterday to allow the german coalition to suffer a I told you so but the German hard money crowd will celebrate and not care about the rally in the EURO—and the rise in yields is a nice gift for the Bavarian Burghers

  4. Chicken Says:

    Thanks Yra, nice to have the clear explanation. Now back to the business of importing more unfriendly oil, the great military machine needs order flow…..

  5. Chicken Says:

    BKCC – “Much like Goldman Sachs, Blackrock is spreading tentacles across Europe at a startling rate. In a sign of its growing influence, the firm met EU officials to discuss financial market matters more times than any other company in the seven months to July, Financial Times reported this week.”

  6. Dustin Vogel Says:

    Yra, I have been reading your posts and never purchased the “Rotten Heart of Europe”. Do you still have copies you can sell me? Please advise, and thank you.

    Dustin V

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