 okay hello and welcome just gonna get everything up and running we'll give it a minute for everyone to on board so to speak so hope you are well we haven't done a live session like this in a while thought it was a little bit overdue so absolutely happy to jump back on and and hopefully give you a bit of a prep for NFP coming up momentarily so yeah we'll give it a minute and then I'll get into a full rundown so yeah welcome welcome I hope everyone is well happy Friday I'll give it 60 more seconds and then I'm gonna just jump dive right in and let's talk about non-farm payrolls coming up if you are watching this on social there should be a chat function so feel free to drop me a message I know we tend to get some of our regular followers tuning in so it'd be great to hear from you Kevin, Kavi, Rav, I hope you are well just for the benefit of anyone who's not actually joined us on a session like this before I'm gonna try and keep this to a fairly introductory level in some respects because I'm sure a lot of you have probably never even watched non-farm payrolls live but I always think it's a really great learning opportunity to watch this kind of stuff as it happens there's no better way than you know kind of learning this stuff in theory what is it what does it mean how does it plug into things like monetary policy and subsequently market reaction and movements but then to just see it play out and watch it in real time there's no substitute for that kind of screen time so hopefully yeah we can we can watch it all together I'll give you a quick you know run-through of what to look out for we'll have a look at the charts I've got a couple in front of me here at the moment so I've got Euro dollar top left cable centre top gold on the right and then we've got the US 10 year NASDAQ 100 and the S&P 500 so yeah Antonio I hope you're well okay hi everyone in the chat cool well look let's get cracking and let's start talking about what's to come so gonna switch over my screen and let's just talk about the economic calendar and what we're looking out for just from a I guess release perspective because if you're not used to looking at non-farm payrolls there is a great deal of information to tackle non-farm payrolls is a multi kind of faceted event although the market and what you'll read in headlines and certainly how the market will react in its initial knee-jerk fashion will be very much dominated by the headline change in non-farm payrolls that is here 185,000 then you've got things like private payrolls manufacturing government payrolls down employment rate average hourly earnings the list goes on now couple things just on the calendar perspective whenever you get a bunch of numbers like this the really important thing to do in preparation is to identify well what truly is the market going to lock onto that's going to determine the subsequent reaction when the information comes out now the headline ultimately will be indicative of the first reaction a lot of that is built on algorithms so computerized trading systems which are basically plugged in to the API at the BLS soon as the data point hits it's just a fixed binary formula that will hit depending on how out of line the number itself is as to what the subsequent machine reaction might be so a key component to understand there of course is the ranges and when I mean ranges I'm talking about here so you've got a low-end range of 125,000 so I these are the most pessimistic banks on the street and what it is that they're expecting this number to come out today so 125 so they're below the median consensus then the more bullish point of view 305,000 it really doesn't matter which investment bank is at the top or bottom the general distribution follows a normal bell shape curve so it's all clustered around the median but to identify the the nature of how violently the market might react it's very important to understand the fringes if you like of what define the least likely and scenario on both a downside and upside surprise ultimately the larger the standard deviation away from what the market is expecting the bigger the reaction that we could expect on the initial move in markets the other thing here is about okay so if you plug in now the macro context obviously something that's really important here is inflation you know when you talk about central banks at the moment the whole continuous conversation is about inflation that's what really drives their decision-making at the moment we've had obviously three of the big central banks this week to Fed the ECB in the Bank of England now it does mean that the headline change in jobs at 185 this is what that number looks like over the course of the last 12 months so all of the last 12 reports and you can see here there's been a graduating downward trend fairly consistent and 185 would just continue that trend what the markets probably going to latch on to more so is going to be one of these average earnings data points and these are really quite indicative of then once you hear that number the market might pop one way or the other but I would say very unlikely that you could commit to any type of trade with any level of conviction into really you've been able to hear and digest these numbers these are ultimately very key inflation of course in the US has been decreasing Jerome Powell the Fed chair said in the Fed meeting two days ago that they can say now for the first time that the disinflationary process has started so you know inflation going down is not too much of a surprise but I guess how much is it going down or is it not going down and in fact wages if they come in higher than expected what you could see then is certainly reversal inequities which have been very well bid generally since the FMC meeting on Wednesday I'd say if anything the US equity market here is a little bit ripe for a decent downside reaction for that to happen you probably want to see that wage number come in over and above the high end of expectation on the month-to-month reading that would be something in the region of point six it's expected at point three percent you'd also expect the 10-year to drop as yields pop higher and the dollar in that scenario would likely strengthen quite aggressively and thus you're a dollar and cable would come down to retest you can see here that previous morning low which was yesterday quite quite a key support level in the euro top left and cable retesting the the morning as lows on the flip side if inflation is indicative of what average earnings come in low and low would be bottom end of the range point one so if it came in flat month-to-month or even negative well then certainly you could get another push-up squeeze inequities to retest the overnight highs that was seen prior to the close on Wall Street after we saw a bit of a pullback after those weak mega cap tech earnings we had and the alphabet Amazon Apple all missed on their expectations okay so few other things just to have a look at and what I'll do is I'll turn the scorecon we'll be able to listen to all the information as it comes out whilst we're looking at the charts in real time so switching over again and this is essentially the data points that have come out as a prelude to non-farm payrolls real key thing about understanding how markets are going to react to the release of fixed scheduled information is how our markets positioned now how do you determine that well you can look at the charts and you can see as I was saying the equities are quite overextended given some of the information that we've had and the move more broadly we've had since year-to-date which has been a decent equity performance but definitely bolstered by the Fed so we're pretty high in the context of recent market trade but also a lot of the expectation is derived from how did these other employment indicators come out that would measure around the same survey period of which this non-farm payrolls report is gathered by the Bureau of Labor Statistics the BLS so here we can look at things like challenger job cuts so generally been a positive number of corporate layoffs jumped in January from 43,000 well I'm not sure that's a positive I'm not sure why they've written that but layoffs have been going up and obviously that's been a common theme that we've seen particularly with tech stocks trimming the fat if you like and we've heard that from all those big tech names that we've heard report this week from Microsoft through to Metta and Metta of course exploded after market last night big part of that reducing their cost base given the large-scale job cuts that they've inaction so job cuts generally have been increasing initial jobless claims the last jobless claims release came in a bit below expected again I don't really think this is really going to move the needle as far as people's consideration for what the feds might do certainly much more on the inflation metric which does render some of this quite redundant if you follow that that chain of thinking the other things you'd look at are you obviously get the ISM the manufacturing service PMI data points and within that are components of which one of the measurements is employment so the others would be things like prices paid infantry these types of measurements to see a granular breakdown of the overall PMI figure the employment one has been negative for manufacturing the subindex came in slightly worse than the prior month and in contraction so below 50 at 47.4 and the services number doesn't actually come out until but let's hear service number release on Friday January 6th it can be easily okay so I think maybe some of this is a bit dated so I'll just talk through this is just a rather than the numbers as in the matter of fact of how to kind of prepare for these things in future other measurements you can look at the one big one is ADP so if we just quickly jump out of here come back to the labor statistic and go down to ADP you can see ADP came here 106,000 early in the week and that was against market consensus of 178,000 it was the lowest reading since January of 2021 so we had a particularly bad ADP number and bad in a sense actually means fairly good if you're looking at equities for example because it means then the Fed are probably less likely to want to aggressively keep rates higher or at least continue hiking at the pace that they had remember they downshifted to 25 basis points in this meeting for the first time and so yeah ADP you can see here under shot quite a bit in terms of a drop from the prior months reading and also was firmly below market expectations one of the things that was noted here was though to be aware of that the soft January reference week was when the US was hit with extreme weather so this is a really important point actually and just before we listen out for the numbers because if it's extreme weather impacted that means that there's probably not an underlying trend and thus you wouldn't really read too much into one figure that makes sense alright I'm gonna switch the squawk on the release will be coming out any moment we'll listen in to the numbers as they hit and then I'll try and talk you through what's going on and how the market is reacting so you can see the charts on my screen I'll make them a little bit bigger as I talk about each one as we go through in a moment 260,000 okay so just to be clear of what we've heard here the actual headline figure is way higher than expected at 517,000 the average hourly earnings are relatively in line so here you've had an initial movement of equities down so this is a negative for stocks because the jobs number is much higher so just focusing on that alone the reason for the downward move is because then it kind of strengthens the idea that labor market is solid so therefore can withstand then a higher interest rate environment from the central bank if they deem then inflation is still proving more durable and so equity valuations typically don't like a higher rate environment particularly given the market positioning I was talking about you can see the NASDAQ and S&P initial reaction is down as is T-notes as is gold as is the currency pair so if you look at all of these charts you've got FX pairs gold commodities and US stocks they're all going down and so it's a uniform move based on this idea then the rates could stay technically high I'm not saying that the Fed will do that that's just the initial assumption here of what's just come out if I actually look at the the rest of the numbers just I've got them in front of me the average hourly earnings on a month a month was 0.3% so it's in line with expectations the year on year 4.4 0.1 higher than expected the unemployment rate was a little bit lower 3.4 against 3.6 expected so again that's an incredibly high payroll headline because if you remember the range that we were looking at if I just quickly jump over my screens to here the headline top end of range remember we're expecting 185 the top end was 305 and if we go back then to what the previous payroll numbers were the last time we printed up at this high you'd have to go back to last summer July 2022 so you can see this is way over and above so one of the things that's sensible to do now in this scenario is to jump on the BLS website which I can do now and start actually delving into the report was what what has created so one of the things that's really important to do when you're trading or you're an analyst is when you see such a stark outlier my mind thinks well why how did that happen how can analysts economists on their estimate be so off-piste and therefore is there a reason and because is if it's an anomaly and there's an explainable one-time effect well then actually there could be an opportunity to reverse this market after the initial pop that we've seen so let's just well I'll leave it on the charts for one second I'll quickly grab the BLS report and let's have a look so let me talk you through then just so this is the Bureau of Labor Statistics report this is the website so if you just go into new releases you can click on that this is the actual kind of genuine report that comes out so you can see the headline number here and generally what I do in this case is just have a very quick scan through all of this to see well why and what justified such a pop in those numbers and you can see here job growth was widespread in January led by gains in leisure hospitality professional business services and health care employment also increasing the government and that partially reflecting the return of workers from a strike you know so that's so things like this are quite key it's like well if it's workers returning from a strike it's just a quirk of how this data is gathered it's not new people joining the workforce it's ultimately people just coming back who were already employed but were on strike and the way that they get measured kind of they've fallen out and fallen back in so not as good a scenario as if people were getting fresh genuine new employment in that situation but obviously this comes in the context of a lot of people still trying to determine in the US are we going to have a recession if so when how deep so forth but the market you know the jobs market remains pretty robust actually I actually think that this is I know the initial reactions have been obviously the dollars been being bolstered by this and that's weighed on euro dollar and cable they have both extended on some of the downward move through the break of those technical support levels we were just having a look at you can see here that euro probably now as an area of support just on that low that we had overnight in the Tuesday go Wednesday session cable already breaking through that morning load just helping add a bit more weight but yeah are the Fed going is this will this change what the Fed are going to do I don't really think so just given the proximity of the Fed event I actually think if anything it's not a bad situation for stocks at least because even though they've come off a little bit the moves being relatively contained but if the employment market is going to remain robust and inflation continues to come down and the Fed continue to downshift and do indeed get close to then their terminal rate the peak of the interest rate cycle well then if we don't have a recession we have a soft landing isn't that good for stocks so yeah it's interesting to see how it'll play out and really a lot of the time you've got to wait until the end of the day to see how the dust settles to you know there's two ways of looking at this market right you can be an intraday day trader and obviously you know you're kind of snap in quite aggressive a number like that certainly gives a fairly clean cross asset directional trade everything down in that sense so it's more about the execution and getting hold of that move but then there's the other side of it where if you're a more an investor or looking at this from a fund manager's perspective actually what is a negative short term for prices certainly for equities as I described actually think could be actually a more positive for the reasons I explain all right so any questions at all while I am here and while I am here online live I know many of you probably are already part of the community but I'm just going to share the link for our daily newsletter please do check it out if you haven't already done so and also if you are a student and you have not yet taken part in our finance accelerator simulation sponsored by our partner Morgan Stanley who very kindly is driving our mission to go out there and just attract students from all corners of the world all different walks of life to really identify talent from from everywhere and anywhere so regardless of your background you certainly don't have to be an econ 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generally was deemed to be in certainly in the press a little bit more on the dovish side of things they obviously hiked but they went for that smaller 25 clip markets responded very positively talk of disinflation lack of really pushing back against markets pricing about what the Fed are gonna do in future which is that rates would peak in March and a subsequent 50% easing cycles through the second half of the year he didn't push back against that that explains all the rationale why stocks were on fire post that period of the Fed announcement but here we are we've reversed that I think that's pretty fair to be honest I mean this numbers rock solid on the job creation numbers certainly way more than expected does it change the Fed thinking I don't think a great deal the average early earnings remember we're in line so we're just exactly where we were all things being equal so yeah I think it's a decent move as far as the 10 years concerned but I think in context of the last 20 or 48 hour price action it's not that big a move to be honest Euro wise obviously you had had a bit of euro dollar upside bit of divergence play obviously the Fed talking a little bit more dovish but the ECB stand standing put and talking about look we're gonna hike again by a similar margin in March and then we're gonna review it thereafter so that that gave the euro a bump above 110 yesterday but we've come back below there now and again just breaking through some of these technical levels of support from the last two days just helping assist a bit of a downward momentum but yeah equities though not not so much so at this point let's have a quick look at gold we have to zoom the chart out a little bit see any significant levels coming up kind of where we are at the moment really we start to bring in the high from the levels of Jan so yeah bit of a breakout in gold at the moment below some key levels of late really the last trading day of January which was some of the lower bound of the price action in mid to late Jan has been taken out as is the s2 on the pivot level so yeah a little bit more punchy there but that would fit obviously in tandem with the yield move and the dollar appreciation so this is why you can see the move is a little bit more clean almost you can see the dollar still pushing up a bit as a yield so euro dollar cable the 10 year still pushing down equities less so so again that's where again you've got to pick your spots and pick your product and your asset type because they will react slightly different differently so you have that uniform move and then you've had equities and now I've started to bounce and a less bought into that narrative about a kind of more hawkish reaction all right I'm gonna wrap it up there thanks very much everyone once again I've dropped the link into the the chat for the newsletter the finance accelerator would love to have you on board I think we're even running a finance accelerator later today at 3 p.m. so if you haven't got anything going on jump in and give it a go I'm sure you'll enjoy it and I'll probably see you then all right take care see you next time