US TSYS: Month-End Rebalancing Roils Mky Ahead March NFP
Rates see-sawed higher Thursday, near middle of the session range following late month-end rebalancing trade, volumes spiked on late buying in SPX eminis, ESM2 climbing off lows to 4582.5, before scaling back to 4557.0, while TYM2 trades from 123-00.5 to 122-27 into the FI close, 122-27 (+7) last.
- Little react to earlier data, PCE in-line +0.6%; +6.4% Y/Y; MNI PMI recovered to 62.9 in March, after last month's dip to 56.3. Focus on Fri's March employment data.
- March nonfarm payrolls are expected to have risen by 490k (Bbg primary dealer median sits at 520k). We see two-sided risks to May pricing for Fed hikes and somewhat asymmetric risk to the downside for the broader rate path, but acknowledge that there's a long way to go between this report and the next FOMC decision on May 4, especially in the current geopolitical climate.
- FI rallied briefly after headlines aired Russia's Putin expects gas delivery contracts to be paid in Roubles, buyers must have Rouble funds deposited in Russian banks or risk being shut off. Timing over payments in question: initial report was by today; more recent reporting suggests second half of April to early May.
- The 2-Yr yield is down 1.8bps at 2.2882%, 5-Yr is down 1.3bps at 2.4249%, 10-Yr is down 2.2bps at 2.327%, and 30-Yr is down 2.9bps at 2.4453%.
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USDJPY TECHS: Trend Conditions Remain Bullish
- RES 4: 118.07 2.236 proj of Apr 23 - Jul 2 - Aug 4 2021 price swing
- RES 3: 117.08 2.00 proj of Apr 23 - Jul 2 - Aug 4 2021 price swing
- RES 2: 116.34/35 High Feb 10 / High Jan 4 and the bull trigger
- RES 1: 115.87 High Feb 15
- PRICE: 114.87 @ 17:15 GMT Mar 1
- SUP 1: 114.41 Low Feb 24
- SUP 2: 114.16 Low Feb 02
- SUP 3: 113.47 Low Jan 24 and key support
- SUP 4: 113.14 Low Dec 17
USDJPY is consolidating and trading above the Feb 24 low of 114.41. A key support at 114.16 remains intact, the Feb 2 low. The underlying trend condition is bullish highlighted by a positive moving average set-up. A resumption of gains would refocus attention on the 116.34/35 key resistance. For bears, weakness below 114.41 and more importantly 114.16, would highlight a bearish threat and expose 113.47, Jan 24 low.
US STOCKS: Equity Roundup: Near Late Session Lows
Risk-off theme continues, stocks testing session lows, Rates near highs in late trade.
Recent headlines contributing to the tone:
- STOXX TO REMOVE 61 RUSSIAN COMPANIES FROM INDICES: FT
- EU ENVOYS APPROVE LIST OF 7 RUSSIAN BANKS TO BE CUT OFF SWIFT
- Earlier draft list of seven banks: VTB Bank PJSC and Bank Rossiya Bank Otkritie, Novikombank, Promsvyazbank PJSC, Sovcombank PJSC and VEB.RF.
- Knock-on pressure for Large US Banks: JP Morgan (-5.55% to 133.94, -7.90), Goldman Sachs (-3.82% to 328.10, -13.02), Bank of America (-4.92% to 42.03, -2.17). American Express (-7.49% to 179.86, -14.38)
- Airlines: Boeing (-5.24% to 194.59, -10.76); Delta (-5.05% to 37.90, -2.0)
- Weak auto sales weighing on Honda (-2.68% to 29.74, -0.82), sales in Feb down 20.6%.
- SPX Eminis -73.25 points (-1.68%) at 4295.25; Dow Industrials -674.35 points (-1.99%) at 33215.18; NASDAQ -210.5 points (-1.5%) at 13541.24.
- SPX lagging sectors:
- Financials -4.07%
- Materials -2.54%
- Information Technology -1.96%
EURGBP TECHS: Remains Above Support
- RES 4: 0.8512 High Dec 22
- RES 3: 0.8480 61.8% retracement of the Dec 8 - Feb 3 downleg
- RES 2: 0.8432/78 High Feb 11 / High Feb 7
- RES 1: 0.8406 High Feb 25
- PRICE: 0.8336 @ 17:12 GMT Mar 1
- SUP 1: 0.8306/8285 Low Feb 24 / Low Feb 3 and key support
- SUP 2: 0.8282/77 Low Feb’20 / Dec’19 and key bear trigger
- SUP 3: 0.8242 50% Fibonacci Retracement 2015-2020 Upleg
- SUP 4: 0.8238 0.764 proj of the Dec 8 - Feb 3 - 7 Price swing
EURGBP is trading below last week’s high of 0.8406 but remains above key support at 0.8285, the Feb 3 low. Last week’s recovery from 0.8306, Feb 24 low, suggests the short-term tone is bullish and if correct, highlights potential for a stronger recovery towards the Feb 7 high of 0.8478. This represents a key short-term resistance. Weakness below 0.8306 would undermine a bullish theme while a breach of 0.8285 would resume the downtrend.
