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Too optimistic NFP and unemployment rate expectations: sell stocks!

By: Christian Blaabjerg, Chief Equity Strategist, Saxo Bank - Thursday, July 02, 2009, http://www.saxobank.com

  • The ADP Employment Change was somewhat worse than expected, as we anticipated – dropping 473K vs. -394K expected. Stocks shrugged off the bad news and went higher, but were rejected intraday. The fear is that the Nonfarm Payrolls today will be worse than expected as well and that the expectation for the Unemployment Rate of 9.6% is too low. We expect 9.8%.
  • It is notable that Crude Oil is under pressure – despite USD weakness. EURUSD now at 1.41 and gold performing well at 940.
  • Auto Sales were also disappointing yesterday – showing no rebound yet.

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Additional story

Market awaits US non-farm payrolls. Will yesterday’s ADP report lead the way?

By: Andrew Robinson, FX Analyst - Thursday, July 02, 2009, http://www.saxobank.com

The dollar was already on the back foot as the European session got under way following extremely dovish comments from Fed’s Janet Yellen. European PMI data also seemed to favour the respective currencies over the greenback, with EU PMI at 42.6 vs. 42.4 expected while UK PMI rose to 47.0 from 45.4 the previous month. Sweden reported a sharp turnaround as well, with the PMI jumping into expansionary territory above 50.

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More stories

Crude oil trading showing hesitancy ahead of US holiday weekend

By: Ole S Hansen, Senior Manager, Saxo Bank - Wednesday, July 01, 2009, http://www.saxobank.com

Ahead of the weekly storage numbers crude oil is stuck in a range with a pivot of $70 with $3 either side.
 
Yesterday's firm rejection above $73 on the back of weak consumer confidence numbers saw it sell off before a weaker dollar helped it higher.

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Trading Floor videos

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Todays figures are setting up for further disappointment, since the expectations for the ADP Employment Change are way too rosy. Expect a figure around -550K, which could lead to a test of 900 in the S&P500.' },{ 'image':'http://i.ytimg.com/vi/QIPZuqqkuDg/3.jpg', 'name':'30/06/2009 Watch out for consumer confidence', 'url':'http://www.youtube.com/v/QIPZuqqkuDg', 'time':'4:10','description':'www.tradingfloor.com Today"s figures are important with the Conference Board Consumer Confidence most likely to be a trigger event. It made a major, positive surprise for the May figure, but due to the rather low ABC consumer confidence figures, we expect it to drop to 51 or below today. Also watch out for the German Unemployment and UK GDP figures. Crude Oil making a massive comeback has risen more than 6% since yesterday"s low. Look out for EURUSD, if it breaks 1.4138... could take gold ...' },{ 'image':'http://i.ytimg.com/vi/q-Svjlc4YXU/3.jpg', 'name':'29/06/2009 Commodities under pressure', 'url':'http://www.youtube.com/v/q-Svjlc4YXU', 'time':'3:58','description':'www.tradingfloor.com US Personal Income mom (May) rose unexpectedly on Friday (+1.4%), but that was due to extraordinary social welfare payments. Excluding this effect, personal income dropped 0.1%. On the same note, the US savings rate increased to 6.9% of disposable income (not including the paying down of debt, so the savings rate is actually even higher). The highest level since 1993). The savings rate is negatively correlated to aggregate profits, so one should expect weak profits over ...' },{ 'image':'http://i.ytimg.com/vi/3rR4qjnU97I/3.jpg', 'name':'26/06/2009 Markets fueled by ECB and Fed', 'url':'http://www.youtube.com/v/3rR4qjnU97I', 'time':'3:50','description':'www.tradingfloor.com The injection of cheap liquidity from ECB and the prolonging of credit facilities by FED will make markets trade higher in the short run.' },{ 'image':'http://i.ytimg.com/vi/pdR58ed03O0/3.jpg', 'name':'26/06/2009 The weekly round-up from Trading Floor', 'url':'http://www.youtube.com/v/pdR58ed03O0', 'time':'6:58','description':'www.tradingfloor.com The week ahead. It has been a week for the central banks with important trading news for the markets from the FOMC and ECB Saxo Bank equity strategist Christian Blaabjerg talks to Trading Floor editor Andrew Arnold about what this news holds for trading the coming week.' },{ 'image':'http://i.ytimg.com/vi/hWxXZPwZN7c/3.jpg', 'name':'25/06/2009 Stocks to go up on FOMC announcement', 'url':'http://www.youtube.com/v/hWxXZPwZN7c', 'time':'5:38','description':'www.tradingfloor.com The FOMC meeting yesterday resulted in a continuation of QE at current interest rate level. The bond markets expectation of higher rates was quelled, but the Fed at the same time did not provide any viable exit strategy from the loose monetary policy. The ECB also convened yesterday with the end result being that EUR 440bn. of 1yr funds will be poured into the money markets. This is the ecbs biggest injection to date.' },{ 'image':'http://i.ytimg.com/vi/F20O2Kcsj1E/3.jpg', 'name':'24/06/2009 Where are the green shoots?', 'url':'http://www.youtube.com/v/F20O2Kcsj1E', 'time':'3:38','description':'www.tradingfloor.com The Weekly ABC Consumer Confidence yesterday was out at -53. The lowest since the 9th of February and very close to the all-time low of -54. Where are the green shoots?' },{ 'image':'http://i.ytimg.com/vi/oex4PCMCjxA/3.jpg', 'name':'22/06/09 Buy on dips is still on', 'url':'http://www.youtube.com/v/oex4PCMCjxA', 'time':'3:12','description':'www.tradingfloor.com Watch out for higher rates this week due to US Treasury auction. Positive stock trend, but the fundamental case for lower stocks is still on.' },{ 'image':'http://i.ytimg.com/vi/JSwKAPES1AM/3.jpg', 'name':'19/06/09 Green shoots or brown shoots?', 'url':'http://www.youtube.com/v/JSwKAPES1AM', 'time':'8:25','description':'www.tradingfloor.com The week ahead. Indicators out next week should cast more light on whether the green shoots are actually brown shoots. Saxo Bank equity strategist Christian Blaabjerg talks to Trading Floor editor Andrew Arnold' } ]

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