Stats, Analyses, and Trade Ideas

     This week’s money market news was dominated by the Stats. I’ll give my assessments from the   viewpoint of a trader.

     The headliner, of course, was NFP, which came in at a whopping 227k. But the question in the dealing rooms in London is,'Is it real?'

     NFP is notoriously volatile, so we need to see the revision next month.  My guess is that if Jan holds above 200k, then it’s real.

     So let’s have a look at the other components in the NFP.

     Unemployment rate to 4.8 from 4.7. Ho hum.

     Workweek unch’d at 34.4 VS hourly earnings to 0.1 from 0.4. These stats tell that Americans are working the same hours for less money. The corollary is that people are working more hours for the same money. Sound familiar? No wage inflation. Bonds should love it. Watch the auctions next week.

     ISM non-manufacturing 56.5 from 57.2. Still, a strong start for 2017.

     PMI manufacturing to 56.0 from 54.5, another strong start for 2017, but note that supplier deliveries rallied to 53.6 from 53.0The latter is a contrary indicator because a higher figure implies that suppliers are delivering more whilst ordering less. Keep an eye on this stat.

     All the above figures bode well for stocks, but the SPX is at a barrier of 2300. I would look for a retracement to 2200 or even 2100, where value could be found, before getting in. And if I were looking for a retracement, then I would go long the VIX here at appx. 10%. It will rally if the index declines.

     On to GB, where the BOE published its minutes. No surprises here, as the rate was left at 0.25. Concern over inflation nudging up was put on the back burner, given that there is little upside momentum  from wages.

     But  more significantly, the Bank revised its equilibrium jobless rate from 5.0 to 4.5, meaning that there is more potential expansion in the labour market than previously thought. Another sign of low inflation.

Next Week

     Tuesday, 07Feb17, watch the US - International  trade figures, expected -44.9 from -45.2. DT’s financial advisers will be watching this one.

     Wednesday, 08Feb17, keep an eye on the US 10-yr auction. The previous bid/cover was 2.58.

GB stats to watch

Friday, 10Feb17, watch the Merchandise Trade Balance, and Industrial Production.

Also to watch 
are DT’s proposals for financial markets’ reforms, esp the Dodd-Frank act.

Regards, LJ