Traders take profit from 'recession trade' into NFP and Easter despite jobless claims spike

recession Jobless claims increased more than expected last week, while Fed's Bullard says rates are becoming "sufficiently restrictive". JPMorgan's Dimon says banking crisis raises odds of recession.


Equities are up, Treasuries are mixed, Crude is flat and the Dollar is flat.


Dimon of JPM says the banking crisis increases the odds of recession. China blames NATO and US for continuing Ukraine crisis.


The desk will be open between 1300BST and 1345BST on Friday, 7th April to cover non-farm payrolls. Re-opening Sunday 9th, at 22:00BST, until 6:30BST on Monday 10th. Desk will close then. The service will then resume at 13.00BST, for the regular US session.


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Stocks recovered some of their earlier losses, thanks to a rally led by tech into the long weekend (preview below). This helped offset the declines in equities earlier in the week following abysmal US economic data that sparked new concerns about the economy. Jobless claims data showed that the labour market was not as tight at first thought, with many data revisions upward in the last few months. Bullard was optimistic about the timing of the banking crisis and the longs' profit-taking. Treasuries were flattened, while front-end yields rose throughout the session. JPM's Dimon spoke on CNN and noted that the banking crisis has increased the chances of a recession. He also said the banking system was strong. Oil prices were unchanged but remained higher than their gap-open levels at the beginning of the week following the surprise OPEC cut in production. As the focus turns to the jobs report, the Dollar is flat. However, DXY remains lower than the previous week following the weak labour market data.


Claims of JOBLESS

The large increase in claims is due to the annual revisions by the Department of Labor, which has revised data all the way back to 2018. This shows that the number of initial claims was much higher (and rising) than initially reported, indicating a labour market not as tight as first thought. The Department of Labor has made annual revisions to the data going back as far as 2018. This shows that the claims were much higher than originally reported in the last few months. The revisions allow the Fed to have more flexibility in determining when to end its rate-hiking cycle. They show that the labour market is loosening, and wage growth has slowed.


The number of Challenger layoffs in March increased by 89,7k, up from 77,8k in February. This brings the total Q1 job losses to their highest level since 2020. Andrew Challenger stated "We know that companies are approaching the year 2023 with caution even though jobs are still being created." The large-scale job cuts we're seeing are likely to continue. Rate hikes will continue and companies will be reining in their costs. Tech is leading the job cuts, which are expected to exceed the 2001 record for this sector. The report notes that Health Care/Products and Financials have announced the second most job cuts. Retail has announced the fourth most cuts for 2023, which could be a sign of lower consumer expectations. Job cuts are primarily due to market/economic conditions as well as cost-cutting or business closures. The number of hiring plans for March fell to its lowest level since 2015. This year, "US-employers have announced plans to hire 70,000 employees – the lowest total in Q1 since 2016."


In March, the headline rate for payroll additions will likely ease, providing more evidence that tightness on labour markets is easing. This is good news for the Federal Reserve, who wants to see an easing of employment to aid in its efforts to reduce rampant inflation. The traders will therefore be focusing on the headline and wage metrics to get a better idea of growth and inflation pressures. Recent data that indicated a slower growth impulse and lower prices were received dovishly by the markets. This could lead to a support for risk assets. The fact that the jobs data is released on a holiday means only some markets will be open. We may need to wait until the markets fully open the following week before we can gauge the market reaction. Download the complete Newsquawk Preview.

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Bullard, the Fed's non-voter and hawk, believes inflation will be sticky in future but that rates are currently at the lower end of an'sufficiently restricting' range. He said the Fed must continue to work to bring inflation down to 2%. Later, he said he was less convinced by the argument that credit restrictions would tighten a lot and send the economy into recession. He added that it's not clear to him whether there will be a significant pullback in lending. He said that he had not reviewed the data yet, but JOLTS data was still at a high level. This is why he couldn't get much from the report. Bullard stated that the housing market is still tight because of inventory shortages. He said that inflation appears to be levelling but he wants to see a clear downwards trend. The Fed can't declare victory too soon. He said that the financial stress in the banking sector has abated and that he sees a 85% chance that it will continue to abate. (He put this at 80% during his Monday remarks). If so, he warned that the Fed should stay on its current interest rate path to bring inflation down, while the labour markets are still strong.

Fixed Income


Treasuries fell despite upward revisions of jobless claims as bulls profited from NFP

2s +6.8bps, 3.831%; 3s +5.5bps, 3.601%; 5s +2.8bps, 3.372%; 7s +1.2bps, 3.336%; 10s +1.1bps, 3.298%. 20s 0.1bps, 3.661%. 30s 1.5bps, 3.542%.

Inflation breakevens

5yr BEI -0.6bps, 10yr BEI -0.9bps, 30yr BEI +1.33bps, 2.297%


The T-Notes gradually rose through the APAC session on Thursday, right up to the NY transfer. The bid was further supported by the fall in German Construction PMI after the unexpected RBI rate pause. As US traders arrived, a 2k+ Ultra 10yr futures block purchase was observed. After the jobless claims data, tape action was erratic. T-Notes reached highs of 116-30, a seasonal adjustment-driven spike, but then quickly reversed lower and found support at 116-13, after some block sales in 2yr or 5yr Futures. After the data, contracts were choppy between 116-13/116-23 until the settlement. The front-end was under continued selling pressure until the afternoon in NY, as profit-taking after the rally during the week leading up to NFP/Easter flattened the curve. Fed's Bullard, (nv,hawk) spoke on the wires but his comments didn't have any significant impact on Fed pricing/Treasury Yields. He did, however, say that rates were now at the lower range of "sufficiently restrictive" and that he was more confident than he had been on Monday in the fact the banking crisis would fade. In addition to the NFP, traders are also looking ahead to next week's refunding, where 3s and 10s will be sold on Tues. Wed. and Thurs., as there is less time to make concessions due to the holiday.



SR3H3 -0.3bps at 95.128, M3 -5bps at 95.175, U3 -11bps at 95.525, Z3 -12.5bps at 95.895, H4 -12.5bps at 96.35, M4 -10bps at 96.75, U4 -8.5bps at 97.035, Z4 -6.5bps at 97.19, H5 -5bps at 97.26, H6 +0.5bps at 97.29.

US SOFR at 4.8% (prev. Volumes at USD 1.427tln, SOFR of the US at 4.81% (prev. 1.427tln).

Demand for NY Fed RRP Ops at USD 2,174tln. (prev. Demand for NY Fed RRP op at USD 2.174tln (prev. 107).

US EFFR is 4.83% (prev. Volumes at USD 102bln, EFFR at 4.83% (prev. 103bln).

US sold USD 61bln in 1-month bills, at 4.440%. Covered 2.81x. US sold USD 51bln in 2-month bills, at 4.650%.

US keeps the 13-week bill and 26-week bill at USD 57bln each. Both bills are to be sold and settled on 14th April.



The crude oil market was choppy Wednesday, as we head into the long weekend.

WTI front-month traded between 79.65 and 80.96 on the lows, and Brent traded between 85.45 and 84.05, with little change. Oil has been holding onto its gains this week due to the unexpected OPEC cut in production last weekend. This is adding to the supply issues after the recent problems from Iraq and Kurdistan that reduced global supply by 0.5%. The US weekly inventory data revealed that crude stock draws were larger than expected. The prices also maintained their gains, despite disappointing US data that led to concerns about economic growth. However, the focus now shifts to Friday's NFP data. The energy sector was quiet on Thursday. Libya's NOC noted that its oil production had increased to 1.223mln BPD, up from 1.13mln BPD by the end of March. Azeri BTC crude exports to the Ceyhan Port in May were 19.29mln barrels, up from 18.43mln barrels in April.


Citigroup analysts have raised their oil prices forecasts. They now expect WTI to average USD 79/bbl, and Brent USD 84/bbl, which is USD 5/bbl more than the previous forecast. The desk noted that the expectations of oil prices above USD 100/bbl are exaggerated for the short-term, while the risks of higher supplies and lower demand have increased. They expect lower prices in 2024 and later this year.



: SPX +0.36% at 4,105, NDX +0.74% at 13,062, DJIA +0.01% at 33,485, RUT +0.13% at 1,754


Consumer Staples (+0.08%), Consumer Discretionary (+0.05%), Industrials (-0.03%), Materials (-0.21%), Energy (-1.47%).


: EURO STOXX 50 +0.26% at 4,309, FTSE 100 +1.03% at 7,741, DAX 40 +0.50% at 15,597, CAC 40 +0.12% at 7,324, FTSE MIB +1.29% at 27,213, IBEX 35 +0.62% at 9,312, SMI +1.09% at 11,236.



Boeing (BA)

Bloomberg sources claim that Boeing is on track to increase 737 jet production 23% (to 38 per monthly from 31), months ahead of analysts' expectations.

Dominion Energy D

According to WSJ citing source, is considering selling its gas distribution companies that serve North Carolina, Ohio, and parts of Western US. These companies could be worth up to USD 13bln, but they are unlikely to all be sold together.

Constellation Brands (STZ)

STZ beat on profit and raised its quarterly dividend by 11%. It also increased its FY24 EPS outlook. STZ did miss on revenue however.

AbbVie (ABBV)

The company has lowered its outlook for Q1 and FY23 earnings. It said that Q1 results would include USD 150mln in milestones and IPR&D expenses, which will result in a negative impact of USD 0.08 per EPS.

Lamb Weston

The company's guidance for FY23 was also raised, despite the fact that it exceeded consensus expectations on revenue and EPS.

Levi's (LEVI)

The company beat both the top line and bottom line, while reaffirming its FY23 guidance. If inflationary pressures persist, revenue, gross margins, operating margins, and net income could be affected for the remainder of 2023.

Lumentum (LITE)

Cut Q3 Outlook as it stated in late Q3, A network equipment manufacturer, who represented over 10% of their Q2 revenue, said that due to inventory management it would not be taking the shipments they had originally projected for this quarter.

Costco (COST)

Bear Cave were negative on March sales. Bear Cave was negative on

Airbnb (ABNB)

It has revealed that the platform is now focusing on professionally managed properties, despite numerous scandals and horror tales. ABNB’s professional hosts have built their own booking platform and are offering cheaper rates to reduce competition.

Microsoft (MSFT),

Settlement reached with US Treasury Department regarding apparent sanctions violations. The UK CMA has updated its views regarding the

Activision (ATVI).


Microsoft (MSFT),

Microsoft welcomed the decision but found that ATVI's acquisition by MSFT will not harm competition. Microsoft welcomed the decision, but

Sony (SONY)

It was called irrational.


DXY continues to fall as data raises concerns about growth, while APAC is focused on central bank divergence


The broader Dollar and Index have lost ground in a week that has seen a lot of data. Monday's DXY weakness was due to the drop in yields and the ISM Manufacturing PMI, which both pointed out further contractions in March. Prices also cooled, but Fed hawk and non-voter Bullard refused to accept the current market expectations of rate cuts. The index fell on Tuesday due to a JOLTS report that was below expectations. The metrics were at their lowest level since May 2021. This heightened expectations of tighter credit conditions and possible rate cuts in the coming months. The Dollar, on the other hand, appreciated Wednesday, in a seemingly haven-driven movement, despite a weak Services ISM and a significant decline in the Price Component. Goldman Sachs had warned ahead of Thursday's release that seasonal factors in jobless claims may be used to correct problems introduced by the previous update and create distortions. The release of the DXY gave it some momentum to test 102.00 on the upside immediately from a pre-release price of 101.81, while the market pricing for Fed remained unchanged. The index will close out the holiday-shortened European Week around the 102.00 level, having recorded a range of 101.41 to 103.05. Participants are awaiting tomorrow's US Labour Market Report, where the headline rate for payroll additions should ease in March. This would provide further evidence that the tightness of labour markets has been alleviated. Next week, the US CPI and PPI will be released, as well as Retail Sales and the University of Michigan Prelim Survey.


The Dollar has suffered a negative week. The Final PMIs were the focus of the data in Europe. They largely indicated that a possible recession would be avoided. However, the EZ released stated, "The case for [ECB] rate increases is also strong based on the survey's prices gauges." The inflation rate has slowed from its peak, but it continues to be high, especially in the service sector. In the UK, meanwhile, 'the inflationary effect of higher input costs or price changes remains significant. Salary increases are still the largest cost to businesses. In the UK, BoE's Chief Economist Pill said that his speech had no impact on the Pound. However, he did note that "available empirical research continues to suggest that today's change in the Bank Rate has the greatest effect on inflation at an horizon between 12 and 2.