Global Stocks, Futures, Commodities, Dollar Fall Ahead Of Payrolls, Italy Vote

Did Jeff Gundlach do it again? Shortly after the DoubleLine manager told Reuters yesterday afternoon that the Trump rally is ending, that “stocks have peaked” and that it is “too late to buy the Trump trade”, US stocks tumbled to session lows, and have continued to drop overnight, with S&P futures down 0.3%, alongside sliding Asian and European markets; oil and the dollar are also down with the only asset class catching a bid are 10Y TSYs, whose yields are lower at 2.43% after reaching an 18 month high of 2.492% overnight ahead of today’s nonfarm payrolls report. The dollar was on course for its first weekly decline in four weeks as investors trimmed bets following recent gains.
However, the big risk event is not the job report, but Sunday’s Italian referendum, which has cast a blanket of concerns over Europe, and especially its banks, and has prompted financial markets to end the week the way they started, “overshadowed by caution as stocks fall with commodities, the yen advances and a selloff in Treasuries abates” in the words of Bloomberg.
‘There is a great deal of trepidation among investors ahead of the vote,’ said Ken Odeluga, a market analyst at brokerage firm City Index in London. ‘Even though we got a bounce yesterday after the OPEC agreement, there is still a huge amount of interest on the earish side and shorts in place. It’s the focus for Europe, and we are going to see more selling out of equities if we get a negative outcome. There is certainly room for more volatility.’
Recent strong economic data from the U. S., including upbeat manufacturing activity and construction spending, have bolstered the view that the Fed will tighten monetary policy faster than expected to keep inflationary pressures in check. U. S. employers probably hired 179K workers in November, up from October, making it almost certain that the Federal Reserve will raise interest rates later this month. However, recent jitters that the ECB may announce a tapering of its own QE program next Thursday has become a bigger source of worry for markets than the Fed’s second rate hike in over a decade.
Today’s payroll number therefore comes at a very interesting time. The market consensus is for a 180k print which follows a 161k gain in October. The range though between economists is anywhere from 140k to 250k. The average YTD print is 181k. As always keep an eye on the other components of the report including the unemployment rate (consensus is for no change at 4.9%) and average hourly earnings (expected to rise 0.2% mom). The report is out at 8.30am.

This post was published at Zero Hedge on Dec 2, 2016.