It’s not a great survey or anything in terms of its correlation to payrolls, but the ADP employment report does get market attention and last night it was for all the wrong reasons. Employment growth was weaker than expected at 119,000 in April (170,000 expected), and we also saw some disappointing news on the jobs front out of Europe, with German unemployment rising 19,000 in April and the unemployment rate being revised up to 6.8 per cent. For the eurozone as a whole, unemployment is at a 15-year high, at 10.9 per cent in March (up from 10.8 per cent in February). European equities didn’t have the best of sessions it’s fair to say and the Dax fell 0.7 per cent, the FTSE fell 0.9 per cent, although the CaC was up 0.4 per cent (consumer end tech stocks doing especially well).

It was in Spain where we saw some of the biggest falls. IBEX was down 2.6 per cent and there was a combination of factors at play. Moody’s is about to complete its review of eurozone banks and obviously investors are nervous about what this means for Spain’s banks. Santander for instance fell over 3 per cent. But the thing is while financials were one of the worst performers they weren’t the worst. Energy stocks were, and telecommunications weren’t far behind. The problems appear more general and include things like the Bolivian government nationalising the assets of a Spanish firm, manufacturing data was weak, etc. So I don’t think we should overstate the concern about the county’s banks – no imminent collapse and there were plenty of other stocks outside of the finance sector that were smashed as well. For the government sector, just note that Spain’s 10-year bond yield rose about 7 basis points to 5.85 per cent, still below the peaks of 6.8 per cent recorded in 2011 but about 90 basis points higher than the yields we saw in March.

But back to where we started, in the US the S&P500 dropped at the open and at the low hit 1394 (down 0.8 per cent). It spent most of the session making up some of those losses, but in the end, the index was down 0.3 per cent (1402). Energy, financials and basic materials weighed most heavy but consumer stocks and tech managed to finish the session in the black. As to why energy and basic materials weighed most heavy? Well commodities didn’t have the best session and that’s because of weaker data obviously and also because of a report from the US Energy Information Administration suggesting crude inventories rose to a 21-year high! So WTI was down 0.7 per cent to $105.3 and Brent fell 1.1 per cent to $118. Elsewhere we saw gold down smalls to $1653 and copper fell 1.5 per cent. Not helping things here was a 1.5 per cent fall in US factory orders out last night. Otherwise the Dow was then off 0.1 per cent (13268), while the Nasdaq rose 0.3 per cent (3059). The SPI was then up 0.1 per cent to (4432).

As for fixed income, it was a new day and a new batch of record set for bunds. German yields fell to yet another record low with the 10-year yield at 1.6 per cent and the 2-year yield at 0.08 per cent. In the US, the 10-year yield is only a little above bund at 1.92 per cent, despite a much worse fiscal position. That yield is only a little weaker than what we say at 1630 AEST yesterday (3 basis points). As for the 5-year treasury yield, it fell 2 basis points to 0.82 per cent while the 2-year was little changed at 0.26 per cent.

Not really much else to say. Forex wasn’t that exciting and the Australian dollar is little changed at 1.0334. Euro then dropped about 80 pips or so to 1.3158, while sterling was 25 pips lower at 1.6200 and yen did little and sits at 80.14. Other than that, US mortgage applications were little changed in the week to April 27.

So, the day kicks off with NZ employment data at 0845 AEST, but there isn’t much else and for Australia there is no data worth mentioning. The Chinese manufacturing PMI comes out at about 1100 while tonight it’s worth watching the ECB decision (no change expected), eurozone PPI, US jobless claims and the non-manufacturing ISM.

Adam Carr is a leading market economist. See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.

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Adam Carr's not so bullish today (SCOREBOARD: Jobs jolt, May 3). Is the weight of negative data finally worrying him? The "we have nothing to fear but fear itself" mantra sounds cute, but we have plenty to fear. The GFC is ongoing. It's not a "crisis of confidence", it's a crisis of debt. The impressive rise in the Dow is due to the flood of printed cash from the Fed, not that the US is "getting back to normal". You have to put your free money somewhere, and bank interest in the US dollar is about zero. But the "recovery" has been built on a stunning rise in US Federal debt – 64 per cent in about three years. These numbers are staggering. They have no idea how to resolve this. It's not OK! And now the recovery isn't so good. And now Europe is unravelling.
Whistling a happy tune and "positive thinking" won't cut it. This is real.
M W is spot on (May 3, 9.26am). The debt fuelled growth of the past (both private and government.) will take decades to unravel/deleverage and the worst is yet to come (SCOREBOARD: Jobs jolt, April 3).
Very true, MW (May 3, 9.26am). At some point the debt has to be repaid. Printing funny money delays the inevitable crash and the current uncertainty prevents a true recovery.
Great comments, it's so true that keep calm and carry on mantra ignores the debt (SCOREBOARD: Jobs jolt, May 3). The fact that if any government or bank had the magic fountain of easy credit switched off the lack of foundations would become apparent as quickly as it did in 2008. We have to remember that Adam's articles are based around trading and hence the presumption of good times can sometimes sustain rallies that traders can make money off regardless of the farcical nature of the big picture.
If Adam is less bullish and a bit worried now because of overseas data, just imagine what he's going to be like in January after the budget cuts and carbon tax numbers hit the Australian economy (SCOREBOARD: Jobs jolt, May 3).