US jobs numbers disappoint

Raises expectations for fiscal stimulus

Chart of the Day

The US non-farm payrolls report showed that the labor market added just 245,000 jobs in November, which was basically just half the consensus estimate. A comparison with Canada, which also released jobs numbers, showed how disappointing the US figures are. While Canadian employment is now down by 2.5% YoY, that in the US is still down by 6.2% YoY. The poor result has seemingly made a further short-term fiscal stimulus more likely, which as we shall see shortly means the disappointing economic data actually had the counterintuitive effect of causing bond yields to rise.

Macro

The US trade data showed exports and imports both rise at a similar amount in October, but as imports have recovered more quickly than exports the trade deficit remains very wide.

German factory orders got back to their pre-virus level in October, we’ll find out Monday how far production is still lagging behind.

Markets

The further rise in long-end US yields at the end of last week means the 30y-5y spread, as well as the 10y-2y spread, are once again the widest in years.

The US oil rig count is rising amid the latest oil price rally, but the increase to 246 last week still left it far below the pre-virus level.

The CFTC commitment of traders report showed that traders added to their net long positions against the USD last week, and remain heavily short the greenback.

That’s been a winning trade; while the DXY was unchanged on Friday, it dropped sharply over the week as a whole to its lowest this year.

Traders now hold modest net short positions in both the S&P 500 and Nasdaq e-mini futures.

Many may be taking the view that, following the vaccine news, large caps will underperform small caps. That has also been a good trade since November, with the Russell 2000 outperforming the S&P 500 again on Friday and over the week as a whole.

The volume of US equity call options outstanding has surged in recent weeks and is closing in on the late-June high. Many traders are increasingly using calls to put that single companies will continue to perform well.

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