US DATA: ADP Beats In Solid Report, Usual NFP Correlation Caveats Aside
Apr-02 12:44
- ADP employment growth was stronger than expected in March at 155k (cons 120k) after a marginally upward revised 84k (initial 77k) in February.
- It leaves an average monthly 142k increase in Q1 and with the latest increase above the average 144k in 2024, offering a reasonably solid report along with other hard data vs weaker soft data.
- Correlation with private payrolls growth remains a concern. In latest vintages for both releases, ADP undershot by -56k in Feb, overshot by 105k in Jan and undershot by -111k in Dec. That said, the private payrolls series has admittedly been the more volatile series in recent months.
- Bloomberg consensus for private payrolls currently stands at 135k.
- With that standard caveat aside, there was an impressive bounce in seasonally adjusted hiring from smallest firms, with those with 1-19 employees adding 42k jobs after a rare 4k decline in Feb (revised from the -17k initially, a first monthly decline since Dec 2023).
- There’s no clear trend by firm size when comparing the Q1 average job growth to that of 2024. The smallest (1-19) and largest (500+) employees have both seen a moderation in hiring (average 22k vs 39k and 54k vs 67k respectively) but all other sized firms have seen an acceleration in hiring.
- On the pay front, median annual pay eased to a new recent low for job changers at 6.5% Y/Y (from 6.8% in Feb and through September’s 6.6% for the lowest since early 2021.
- Job stayers meanwhile eased a tenth to a joint recent low of 4.6% Y/Y (otherwise lowest since mid-2021) with the combination seeing a joint low for the pay premium at 1.9pps.
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OUTLOOK: Price Signal Summary - Sell-Off In Bunds Exposes A Key Support
Mar-03 12:33
- In the FI space, Bund futures have pulled back from their recent highs and the contract is trading sharply lower today. The move down undermines a recent bullish theme. A continuation lower would expose the next important support at 131.26, the Feb 19 low. Clearance of this level would be viewed as an important short-term technical break. Two important resistance points remain intact for now; 133.46, the Feb 28 high, and 133.71, the Feb 5 high.
- A bull cycle in Gilt futures remains intact and - for now - short-term weakness appears corrective. The contract has recently traded higher and this highlights scope for a test of resistance at 93.39, the Feb 13 high. It has been pierced, a clear break of it would open 93.83, the high on Feb 6 and a bull trigger. On the downside, key short-term support has been defined at 91.79, Feb 20 low. A break of it would highlight a bear threat.
EQUITIES: Autos Lead Latest Leg Higher In Estoxx50 Following CO2 Announcement
Mar-03 12:33
Eurostoxx 50 futures briefly marked a fresh all-time high of 5559.00 before stalling, but remain +1.6% higher today at 5545.00 at typing. A clear breach of the Feb 18 high at 5550.00 would expose 5574.57, the 2.382 projection of the Nov 21 - Dec 9 - 20 ‘24 price swing.
- Autos have driven the latest leg higher, after EC President von der Leyen announced measures providing leeway in meeting 2025 CO2 emissions targets: “Instead of the annual compliance, companies will get three years on the principle of banking and borrowing”…. “The targets will stay the same but it means more breathing space for industry and more clarity, without changing the agreed targets”.
- Defence stocks continue to lead the intraday rally, amid expectations of increased defence spending across the EU and particularly in Germany.
EURJPY TECHS: Impulsive Rally Highlights A Possible Reversal
Mar-03 12:20
- RES 4: 161.35 61.8% retracement of the Dec 30 - Feb 10 bear leg
- RES 3: 161.19 High Feb 13
- RES 2: 159.65 50-day EMA and key short-term resistance
- RES 1: 158.36 Intraday high
- PRICE: 158.31 @ 07:34 GMT Mar 3
- SUP 1: 155.93/154.80 Intraday low Low Feb 28
- SUP 2: 154.42 Low Aug 5 ‘24 and key medium-term support
- SUP 3: 153.87 Low Dec 14 ‘23
- SUP 4: 152.72 1.00 proj of the Jan 24 - Feb 10 - 13 price swing
Today’s strong rally in EURJPY undermines a recent bearish threat and instead highlights a potential developing reversal. The cross has traded above the 20-day EMA and this signals scope for an extension towards resistance around the 50-day EMA, at 159.65. Note that a major support at 154.42, the Dec 14 2023 low, remains intact. A break of this level is required to reinstate a bear theme.
