 What I'll do is as I'm going through this I'm gonna do about a 10-minute rundown We'll tune in to the new squawk team and they will announce the news live as it comes out We'll then have to charts up. I'll do my best to talk you through why what is happening is happening And we'll look at all the different products on my screens. I'll have a few different FX pairs US stock indices I can now could flash up things like gold tea notes So on and so forth. So we'll have a bit of a cross-asset view And then yeah, any questions at all as we go feel free to drop them in I'm here solo so I'll do my best to try and fill them the best I can But I'll probably leave some of those till the post event and then tackle them as and when Yeah, happy Friday everyone. Hope you're doing well Good to see some of the familiar names in the in the chat Okay, well, let's dive in and let's start talking about Just what's been going on. It's been an incredible couple of days. Actually. I mean just having a look at the S&P 500 here I'll make this chart. It's a little bit bigger. And really this is this week's price activity and Really a combination of two major events. Of course. We had the first one which was The drone power semi-annual testimony Which I'll kind of dive into a little bit more in a moment of the main comment And why that's really set the scene for this release and then the forthcoming CPI number will get on Tuesday on the 14th So he had that leg lower after we had seen you know decent push higher into the clothes of last week This time last week. So we sold off on Tuesday aggressively as we know and then we dipped again Yesterday quite sharply and that came on the back of a bit of a run on the US banking sector You probably would have read by now The focus on the Silicon Valley Bank SVB and now that's Reverberated across some of the other larger financials on the potential contagion impact Still a lot of debate going on at the moment about whether that's going to transpire or not And how this time is you know different to say something like Lehman's which I'd probably agree with Check out the podcast peers and I have just put out we we talk about that situation a bit more closely But that obviously was a This second factor that compounded the sell-off that we've seen this week And it's been a pretty violent move and we've gone from around 40 80 at the peak in the S&P We have recovered off lows But obviously last night we did get down towards 3900 and really this figure could be decisive of a retest down at that Low or recovery back up in towards that range. We were trading before the shakeout that we had yesterday So what can we expect from this payrolls report? Let's have a quick look and so First things first here he is your main man J Powell and the comment that really triggered that that spill out or spill off in there The US equity market this week was that the Federal Reserve or likely need to raise interest rates more than expected in response to recent strong data and is prepared to move in larger steps if the Totality of incoming information suggests tougher measures are needed to control inflation now This is all obviously super important because he's really Saying something hawkish. Yes, that they're willing to basically respond to strong data and increase the increment size of the hike and Therefore the terminal end rate likely for for fed in this rate cycle However, what he is saying and this puts greater emphasis and will likely Increase exacerbate the volatility around today and next week CPI number is that really? It's all the chips are on the table now What the Fed are gonna do on the 22nd really comes down to the information We're gonna get in nine minutes time and that that follows up on Tuesday So this is really quite meaningful now And we'll definitely shape the sentiment as we go into the end of the week if we get a really Solid payroll report here Definitely, I think we could retest those lows in the US equity market that we saw yesterday on the SVB kind of story And then it could get pretty messy going into the clothes as markets again Recalibrate somewhat for a more aggressive move coming now to give you a bit of an idea It's not as if the markets are caught blindsided here We started the week the market was expecting around a 30 percent probability This is implied probability looking at federal funds rate futures of a 50 basis point rate hike So the market to start the week was leaning more on a 25 move that is what we had become led to believe from a lot of the Fed communication and the possibility of 50 was kind of there but Unlikely until Powell spoke and the narrative has shifted up a gear to the more hawkish side of things So now I pulled this literally about five minutes ago before I came on live So we're at a split of about 60 40 at the moment So the market somewhat is positioned leaning in that direction and so some of that Verosity if you like to the downside has been factored into some degree But I certainly think it depending on how outlying if we get an ultra bullish report of payrolls Certainly that number goes north and if that happens that means yields go up dollar Appreciates that way on the major currency pairs and we'd like to see US equities sell off into the close most probable Scenario now a few other things to be aware of In terms of the figures then of what we're looking out for today The headline change in non-farm payrolls for this month is expected at 203,000 that will be the first number that you're here come out on the on the tape the range So if we're talking upside that would trigger a negative reaction in the form of US equities Anything above 325,000 and that comes of course in context of that huge surprise And this was what really had initiated and fired up some of that hawkish Belief in the market is because January's payroll report was 517,000 we'll get to that in a moment about that number So we are looking for a little bit of a moderation in the headline figure in fact 203 if that came out in line with consensus, I think would be below Multiple months averages, so it would be a slowdown somewhat But we were surprised last month and so could we be surprised again the range 100 on the low side to 325 on the high the unemployment rates expected to be unchanged at 3.4 percent The range there at 3.3 to 3.5 January repeat how likely is that I would say unlikely Looking at some commentary out of analysts at JP Morgan They cite really three factors of why that's likely to be the case and the first one is that last Months figure was buoyed by the ending of industrial actions So the ending of those strikes means that there's a whole bunch of people that's come back into the workforce And that adds them to that top-line figure and that added roughly nearly 40,000 likely supporting then the Numbers relative to regular seasonal patterns. There was then and probably one of the key reasons warmer weather conditions may have helped And while a similar dynamic may be seen in February data They were not deviating as much compared to January and then seasonal factors were hardly supportive in January as well So there was a couple of things there that kind of explain why that might have been a slight anomaly and a one-and-done scenario But stranger things have happened and of course if we were to get a 500k print with an unemployment rate Let's say fixed unchanged at this point Then you'd be looking for that aggressive sell-off type action in US equities and a pop in yields and a dollar on the back of that Quite the opposite though. I don't think we shouldn't talk about the other side So just quickly going back to the numbers. Let's say we do get a low ball number And we breached the bottom end of the range and we're talking double digit rather than triple digit figures for the headline so 50,000 for example And the unemployment might tick up for example, then there could be scope for the complete reverse So the vice versa of what we just described So dollar is a little bit primed for a bit of a pullback as to a stocks for a little bit of a rally Just given the size of the sell-off. I mean, we're only about I would say a Third if just shy of that reversed from the sell-off from just yesterday's session So there could be some meaningful upside in somewhat of a relief if this jobs data Just comes off the boil a little bit and comes in soft final things As per usual heading into payrolls We get a little bit of the other job indicators that give us an insight of what can we expect from the Bureau of Labor Statistics report ADP. So this is private payrolls That came in at 242,000 for the month of February. This was on Wednesday So earlier this week and that did top expectations which was similar looking for around 200,000 as we are for the headline today in payrolls. However ADP has Dramatically under forecast the BLS official job gains for months And so the quality of that relationship I'd say as a precursor as historically it's often been known as I'd say is very diluted at this point in time So I wouldn't really read too much into that the initial jobless claims an important thing here to recognize with jobless claims Although we just had it yesterday that data is not reflective and caught in the survey period of this payrolls report So the initial jobless claims for the week that coincides with the established survey window was little changed versus the January survey window And then for ISM said the Institute of Supply Management looking at manufacturing employment subindex That did actually fall and it fell back below 50 so into contraction actually By 1.5 points to 49.1 while the services employment subindex actually rose a very large Four points to 54 from 50 so a bit of a mixed bag there But service industry obviously super important for the composition of the US economy So might that lift things up again and again create a negative reaction If we were to get a really strong payroll report again Not going to go into the dot-plot going to go back to the charts I'm going to turn the squawk on just so we've got about 90 seconds. So to the numbers here I will play the number release out of my microphone. So you'll hear it come out just to give you a quick Look at the charts here. I've got Euro dollar in the top left cable in the top center Gold spot price on the top right. You got the S&P futures here and the NASDAQ at the bottom beside my video feed I do have a US 10 year just tucked away with a few other charts as well that I can pull in as in when we need to But just about a minute to go now As ever with something like payrolls, so it's always important to just Payroll sprint to get us forecast at 205,000 and then move on to the unemployed rate to forecast the three spot four percent For moving on to any revision to the headline the earnest components Which includes one the month and year of year the average work week hours that it force participation rates Well, I jump to the cat reports and move on to the employment change for cost of 10,000 It was a full-time part of my breakdown unemployed rates participation rates and wages I think of the rest of the US reports 30 seconds and as a reminder terms of her pricing at 25 that's price at 51 spots 6% and 50 and 48 spot 4% It's very much an effort Again, someone's asked my guess It's really not about guessing with this. It's definitely a case if you have to wait and see Rather than guess as fun as that would be on the headline figure Okay, you've got five seconds or so now 311,000, that's 311,000 above the expected of 205,000 An unemployed rate that's three spots 6% above the expected of three spot 4% and the prior that was revised A touch lower to 504 from 517 Earnings about the month zero spot 2% below expected zero spot 3 year of year also soft at 4 spots 6 plus with this 4 spot 7 Average work week hours 34 spot 5 plus expected 34 spot 6 the participation rate that times the 62 spot 5% To promise 62 spot 4 to have an over to Canada Right, so the 10 years exploded higher equities bid and dollar weakness So once again the headlines the touch stronger than expected But within the top end of the analyst range so 311 the unemployment's ticked up remember unchanged was expected It went to 3.6 above the expected 3.4% and then the average hourly earnings year and year is also below Expectations 4.6 versus expected 4.7. So if anything, it's a touch soft So take out that headline figure of which in itself was in the top end of the analyst range of expectations The you've had a jump up in unemployment and a lower than expected average hourly earnings number So yours initially have dropped as is the US dollar that's provided a bit of a bid tone to the major FX pairs and Gold and US equities have just pushed up here on the back of this initial reaction So just gonna make this S&P chart just a little bit bigger you can see here We're just coming up now towards the bottom end of that range So a bit of resistance to be found here in the S&P It's gonna drop a line here Just encapsulating some of though that if that's really been quite a decent inflection point for price over the last two weeks You can see bouncing off a number of times And including what was the midweek before the spillover that we had yesterday evening So just providing a bit of resistance there just struggling a little bit after a shot higher on the initial release Let's just have a little pivot around some of the other charts Here's a look at the US 10 year So the move here very pronounced of course of because of the nature of the fact that we're looking at this from a Perspective of what are the Fed gonna do but you can see after the spike You've had a decent pullback so the market not really taking that on and following through on that initial blip that we've had We're pretty much back to scratch now of where we were Initially, so just keep an eye because so some of those other Moves might well reverse now that that 10 year has pulled back so aggressively so you can see equities are backed off The currency pairs going bid have also reversed as well So markets just chewing over this at the moment the two-month net revision was minus 34,000 Just as a reference point So I'm just gonna have a quick look across some of the news feed see what other things I can spot to bring to your attention Just having a quick look at the actual breakdown of the headline figure. You can see here a bulk of the main jobs Who were coming in leisure and hospitality? followed by their in private education health services, so again the Weather likely just playing a little bit of a help there given the rebound that we've had and that generally typically helps those types of specific job sectors in particular Just having another push back up now in the currency pairs just having a look at the euro here It's just having a go back above pivot Which was also that low point that we had on Monday before the rally that came on Monday afternoon So bit of upside just being seen in the euro currency so further follow through of the dollar move on bit of weakness here So cable likewise just following suit bit of upside being seen Nasdaq again similar Popped higher came back a little bit and now just going bid slowly Not too much here technically on the upside that really jumps out. Maybe a brown This level here if I just put a horizontal So these previous highs coinciding both on Wednesday and also for the peak of the price action that we had to the second half of the prior week That's just about where that initial spike petered out on the the back of the initial release Say a little bit of food for thought for the market, I guess if anything Has it really changed too much of the perception of what the Fed are gonna do It might well just kind of keep that 60 40 kind of market pricing split Maybe that's kind of appropriate with the composition of these numbers and now we just have to wait for the CPI numbers We're gonna get on Tuesday and and that's gonna then is it in line like this Okay SVB So that could also that's all another variable to throw in the mix certainly for today at least Okay, just while we're here then any other Questions at all while we are online Just while I'm here I'm just gonna quickly share as well a few links that you might find useful For anyone who's not on our daily newsletter distribution list Would love to have you in the community free newsletter goes out Monday through to Saturday Covers all the major Things that are happening in markets if you're a student thinking about a Korean financial markets then lots of career tips We get job opportunities shared from our corporate partners. So you get a bit of a heads up for internship a graduate Hiring cycles things like that. So yeah, check out that link also Just had a question very timely. Someone's just asked in the chat about Who are SVB Silicon Valley Bank? And so I am going to point you to listen to this podcast because peers who's the co-founder of amplify and Also our head of trading he and I have an end of week chat always We put out a podcast episode of where the main topic of conversation was drawing power's comments and also SVB and he does a really good concise explanation of what happened to them And whether or not that could happen to a larger financial institution like a JP Morgan a city of Wells Fargo or not So check that link out. I've just shared it Into the the chat Okay I'm gonna leave it at that just short and sweet if I can I'll try and jump on again for Tuesday for the CPI report but my overall conclusion here is yeah a little bit of a dovish reaction across markets has been seen and In terms of where do we go from here? I think I if I was Sat here analyzing it working with the trading team as we would do back in the day I wouldn't really feel the need to pre-commit here and second guess how we finished the rest of this session So to say we're gonna rally now on the back of those numbers I don't think there's enough concrete evidence to probably suggest that I'd rather let the market show its hand and then try To follow that accordingly rather than try to be aggressive and enter the market at this point with the information to hand right now I think overall this really just kicks the can down the road and puts even more emphasis now on the inflation report We're gonna get on Tuesday. It just means then there's gonna be a lot of focus a lot of concentrated kind of Expectation around that to really define then what will happen on the 22nd of March all right Take care everyone have yourself an amazing weekend, and I will see you next time