• Doesn’t expect significant market impact from Greek credit event

Let’s hope…

• ISDA triggers credit-default swaps on Greek debt
• US non-farm payrolls +227K vs +210K exp, prior revised up
• US unemployment rate at 8.3%, as expected
• Canada jobs -2.8K vs +15K exp, unemployment to 7.4% from 7.6%
• US Jan trade deficit largest since 2008
• US Jan wholesale inventories +0.4% vs +0.6% exp
• Trade and inventory data sparks downward revisions to Q1 GDP estimates
• IIF’s Dallara touts “voluntary” PSI deal
• CFTC: euro shorts resume climb
• S&P 500 gains 0.4% to 1371, gains 0.1% on the week
• USD and CAD lead, EUR lags badly

The euro took a nosedive in the first 90 minutes of US trading, falling to 1.3115 from 1.3215. Non-farm payrolls was the catalyst but the cannons were ready and waiting to be fired because of worries about Greece’s default and the European economy. A series of stops took EUR/USD to 1.3096 at the lows but the pair rebounded to 1.3120 and traded in a narrow afternoon range. The Greek CDS announcement caused only the slightest blip downwards.

Post NFP, it’s clear that positive US data will continue to boost the buck. USD/JPY jumped 50 pips on the report and after chomping through a mountain of sell orders at 82.40/50, it popped to 82.64 before settling at 82.47.

AUD was a black sheep today, dropping on NFP despite the ‘risk on’ mood. The initial drop to 1.0575from 1.0630 was followed by a near-full retracement. After Europe closed, however, it was all downhill, falling to session lows after the CDS decision at 1.0570.

Looks like Austria will have to bailout another bank, this one as a result of the Greek credit event.

It will take a few days to find out exactly where all the landmines a buried in the global banking sector after the Greek default.

From a joint statement by the leaders of all the countries in South America, the important ones anyway.

The’ China slowdown’ story is starting to morph into an emerging markets slowdown story. It’s a potential negative headwind to watch for commodity currencies.

Pile back into those euro shorts!

From the Commitments of Traders report:

• JPY -19K vs -1.2K prior
• GBP -37K vs -23K prior
• AUD +62K vs +78K prior
• NZD +17K vs +22K prior
• CAD +26K vs +22K prior
• CHF unchanged at -19.5K

The Commitments of Traders report will be released in about 15 minutes, at 3:30 pm ET.

Last week’s data showed a large drop in euro shorts to -110K from -142K but the euro has been flattish this week so it’s anyone’s guess which way we will go:

Another one to watch is USD/JPY, which has abruptly reversed from +17K to -12K last week (JPY is inverted on the chart). Specs could still drive USD/JPY much higher:

EUR/USD is a shade firmer, 15 minutes or so after the ISDA finally declared that Greece had indeed defaulted on its debt. Hard to imagine what took them so long.

EUR/USD is changing hands around 1.3115, up from 1.31103 in the immediate aftermath of the non-news.

EUR/USD has shown no life above 1.3120 in about 5 hours. Perhaps we get a modest short covering pop late in the day, but only a sadist would sit around to play it…

Call it a weekend, y’all.

For real this time.

Hardly any reaction in EUR/USD but US stocks are falling. AUD/USD now hitting the lows of the day.

The minimal reaction in forex confirms my faith in the intelligence of the FX market, while the fall in stocks emphasizes its stupidity.

Auction to settle CDS to take place on March 19. The decision was unanimous.

Update: it also appears as though the Derivatives Intelligence report was correct, it was accidentally published early and then removed. They have the screenshots to prove it.

–Retransmitting 12:04 ET Story, Correcting Mfg Total, 6th Paragraph
–Obama Showcases Manufacturing Research Network

By Denny Gulino

WASHINGTON (MNI) – A slight uptick in the labor participation rate
in February and an increase in February’s labor force are signs of some
additional enthusiasm about jobs prospects, U.S. Treasury Chief
Economist Janice Eberly said Friday.

She also added some details to President Obama’s pending afternoon
announcement of administration support for a network of manufacturing
research centers.

Eberly said the fact the unemployment ratio remained stable at 8.3%
in February despite an expansion in the labor force part of the equation
of 467,000 is an additional sign of improvement beyond the many
categorical improvements in the monthly report. The increase, she said,
appears to be a result of few people leaving the labor force than usual
during the month.

Eberly said the increase in the labor participation rate which, at
63.9%, was 0.2 point higher than January, was also a sign of underlying
improvement.

But the rate had been higher as recently as December’s 64.0%. As
reported earlier, the Bureau of Labor Statistics said that without a
blip from revised population figures, that rate has been stable for a
long time.

In a press briefing, Eberly said of the 31,000 jobs added in
manufacturing, after seasonal adjustment, “fifty-six hundred were in the
auto industry which has added more than 90,000 jobs … since early
2010.”

Although manufacturing has regained 429,000 jobs since the
financial crisis, that is still a small part of the 2.3 million
manufacturing jobs lost since then. Those jobs added back, she said,
account “for 11% of the 3.9 million private payroll job gains since
February 2010.”

She blamed the fallback in construction jobs in the latest report,
a 13,000 drop, on good weather earlier that borrowed jobs from later on.

“It’s important to remember with construction that this interacts
strongly with the warmer weather that we’ve experienced this winter,”
she said. “It may be the warmer-than-expected weather in December and
January prompted earlier hiring of construction workers than would
normally be seen.”

She also pointed out that state and local governments did not have
any net layoffs in both January and February for the first time since
local government finances started to erode. All the 6,000 drop in public
sector employment in February was “at the federal level” and were not
particularly concentrated in the Postal Service.

She noted that the long-term unemployed, out of a job longer than
six months, are still 46% of the total unemployed, more than double
their share prior to the last recession and “still very highly
elevated.”

In an afternoon appearance at a Rolls-Royce Crosspointe facility in
Virginia, Obama will showcase the Commonwealth Center for Advanced
Manufacturing, a research center that partners with a number of Virginia
universities. Eberly said he will announce support for the existing
network of such centers across the country “designed to focus on
competitiveness and manufacturing excellence,” she said, representing “a
nexus between science and manufacturing.”

Like the Crosspointe facility, such centers are already well
established in many states, many as industry-local government projects.
Obama will announce a new national center for manufacturing innovation
intended to be the hub of the network of centers.

The Rolls Royce plant produces precision fans for jet engines,
including the Boeing 787 Dreamliner.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: MAUDS$,M$U$$$,MGU$$$]

There is a rumor that it appeared for a moment and then was removed but the ISDA is saying that the Derivatives Intelligence report is “incorrect”.

Back to the waiting game.

Six hours to decide whether a forcing investors to take 26-cents on the dollar is default. Seems awfully straight forward.

Derivatives Intelligence, which is a part of the Institution Investor,  is reporting that the ISDA has declared a credit event, triggering CDS.

No one else is confirming, nor is the ISDA webpage. I have my doubts that they would be the first to know and the euro hasn’t moved a tick. Oftentimes, when an event is anticipated, they write the story ahead of time and publish it when it occurs. Could be someone asleep at the switch.

Update: 15 minutes have now passed and there is no confirmation. Safe to toss this one overboard.

• Greece is beginning to stand on foreign ground
• Greece has for the firs time reduced debt
• Today a moment for reflection, not rejoicing
• Must not waste this great opportunity

Yay, we stiffed our creditors! Well done Greeks! Now get out there and evade your taxes!

• The SNB defended currency cap despite the Hildebrand events, according to Bloomberg headlines

Our long national nightmare is over, or words to that effect? That’s what I’d suspect.

It’s a globalized world, Mr. President. Get used to it.

Obama is speaking at a Rolls-Royce jet engine plant in Virginia.

Portugal’s economic woes deepen as economy slows.

The Greek CDS meeting is well into Hour #4 and there is indication on when the announcement on the ISDA website will come.

The knee jerk reaction to triggering CDS will be euro selling and some risk aversion. It’s an open question about how braced the market is for such an outcome. CitiFX out earlier saying it’s only 50% priced in but I would put it at 90% so the reaction will probably be minimal, after the knee jerk. At most, this might knock some initial stops down to 1.3060/50 before the buyers bid it back up.

The market will then look for any secondary signs of forced selling i.e. a bank that’s not prepared for this outcome. This is an extremely low probability event, banks and funds should be prepared for this.

If CDS are not triggered there should be a small pop in the euro, but the secondary reaction will depend on the statement. ISDA could rule that it does not yet have enough info, reserve judgment until later or simply delay the verdict. If so, the  initial move will quickly backtrack.

If CDS are not triggered and ISDA reports that the case is closed, the knee jerk will be higher euro but I suspect it won’t last long (less than a minute). Such a ruling would massively undermine the CDS market. Expect CDS on Portugal to fall dramatically because the process would lose legitimacy. At the same time, Portuguese (and other periphery) bond yields would rise because they would now be uninsurable. There would be a lot of kicking a screaming and many unintended consequences, which generally means yen buying.

–Obama to Showcase Manufacturing Research Network

By Denny Gulino

WASHINGTON (MNI) – A slight uptick in the labor participation rate
in February and an increase in February’s labor force are signs of some
additional enthusiasm about jobs prospects, U.S. Treasury Chief
Economist Janice Eberly said Friday.

She also added some details to President Obama’s pending afternoon
announcement of administration support for a network of manufacturing
research centers.

Eberly said the fact the unemployment ratio remained stable at 8.3%
in February despite an expansion in the labor force part of the equation
of 467,000 is an additional sign of improvement beyond the many
categorical improvements in the monthly report. The increase, she said,
appears to be a result of few people leaving the labor force than usual
during the month.

Eberly said the increase in the labor participation rate which, at
63.9%, was 0.2 point higher than January, was also a sign of underlying
improvement.

But the rate had been higher as recently as December’s 64.0%. As
reported earlier, the Bureau of Labor Statistics said that without a
blip from revised population figures, that rate has been stable for a
long time.

In a press briefing, Eberly said of the 31,000 jobs added in
manufacturing, after seasonal adjustment, “fifty-six hundred were in the
auto industry which has added more than 10,000 jobs … since early
2010.”

Although manufacturing has regained 429,000 jobs since the
financial crisis, that is still a small part of the 2.3 million
manufacturing jobs lost since then. Those jobs added back, she said,
account “for 11% of the 3.9 million private payroll job gains since
February 2010.”

She blamed the fallback in construction jobs in the latest report,
a 13,000 drop, on good weather earlier that borrowed jobs from later on.

“It’s important to remember with construction that this interacts
strongly with the warmer weather that we’ve experienced this winter,”
she said. “It may be the warmer-than-expected weather in December and
January prompted earlier hiring of construction workers than would
normally be seen.”

She also pointed out that state and local governments did not have
any net layoffs in both January and February for the first time since
local government finances started to erode. All the 6,000 drop in public
sector employment in February was “at the federal level” and were not
particularly concentrated in the Postal Service.

She noted that the long-term unemployed, out of a job longer than
six months, are still 46% of the total unemployed, more than double
their share prior to the last recession and “still very highly
elevated.”

In an afternoon appearance at a Rolls-Royce Crosspointe facility in
Virginia, Obama will showcase the Commonwealth Center for Advanced
Manufacturing, a research center that partners with a number of Virginia
universities. Eberly said he will announce support for the existing
network of such centers across the country “designed to focus on
competitiveness and manufacturing excellence,” she said, representing “a
nexus between science and manufacturing.”

Like the Crosspointe facility, such centers are already well
established in many states, many as industry-local government projects.
Obama will announce a new national center for manufacturing innovation
intended to be the hub of the network of centers.

The Rolls Royce plant produces precision fans for jet engines,
including the Boeing 787 Dreamliner.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: MAUDS$,M$U$$$,MGU$$$]

Still no sign of the ISDA decision on CDS….EUR/USD took one more short at the downside on the close in Europe but held onto the lows at 1.3096, reaching 1.30965.

Mr. Market seems to be in little hurry to cover shorts suggesting that the selling we’re seeing today is not speculative but “motivated”.

By Steven K. Beckner

(MNI) – A solid February employment report will make it difficult
for the Federal Reserve to justify further monetary stimulus in the
near-term, but additional quantitative easing at some point cannot be
ruled out, Fed watchers said Friday.

The Fed’s policymaking Federal Open Market Committee is unlikely to
announce further easing following its meeting next Tuesday, but a “QE3″
could come later, depending on the economy’s performance, analysts said.

The Labor Department announced that the unemployment rate stayed at
8.3% in February, despite a 0.2% increase in labor force participation.
It also reported a 227,000 non-farm gain, which was not only bigger than
expected but was accompanied by a 61,000 upward revision to prior
months’ payrolls.

Most of the job gains came in the service sector, but there was
also a 31,000 rise in factory payrolls. Construction employment was
down, apparently because of weather factors. Government jobs declined
again, but only by 6,000.

The index of aggregate hours was up 0.2%, average hourly earnings
0.1%.

The report was well-received on Wall Street and by economists.

“All this looks quite healthy,” said Dean Maki, chief economist for
Barclays Capital, who noted “we are in a pattern where revisions are
upward, not downward” and who predicted that the 227,000 figure will be
revised up as well.

Bank of America chief economist Mickey Levy called the job numbers
“strong” and “consistent with what other data seem to be telling us.”

“It’s the third month in a row in the establishment survey of
healthy gains,” said Levy, calculating that they reflected a 1.9%
annualized rate of economic growth even before allowing for productivity
improvements. He called employment increases in the household survey
“robust.”

Levy said “the economy is improving and is moving into that
self-sustaining mode.”

David Resler, chief economist for Nomura Securities, called the
February employment report “very encouraging” and said he was
particularly encouraged by the fact that increased labor force
participation did not increase the unemployment rate.

“I’m really elated to see this kind of increase” in payrolls as
revised upward, Resler added.

Wells-Fargo economist Mark Vitner was less enthusiastic, saying
“the numbers are good, but the quality is not great.” He said there are
“a lot of part-time and low-wage jobs, so we’re not getting a lot of
income.” He projected the unemployment rate will rebound to 8.5% and
“stay up there quite some time.”

As for the monetary policy implications, Fed watchers generally
agreed that the FOMC is unlikely to take new easing actions next week,
but left the door open to further easing down the road.

At the Jan. 25 meeting, the FOMC changed its “forward guidance” on
the path of the funds rate, extending the expected period of near zero
rates from “at least mid-2013″ to “at least late 2014.” The FOMC also
continued to push down on long-term interest rates through the
“Operation Twist” program of selling short-term and buying long-term
securities.

And the FOMC reaffirmed its policy of reinvesting principal
payments from its holdings of agency debt and agency mortgage-backed
securities in agency mortgage-backed securities and of rolling over
maturing Treasury securities at auction to prevent any shrinkage of the
Fed’s balance sheet.

Maki said “it’s difficult for the Fed to announce further easing
actions coming off reports like this. It’s difficult to say the labor
market is not improving fast enough.”

But Maki said he “wouldn’t rule out further easing down the road if
things soften.”

In recent testimony on the Fed’s Monetary Policy Report to
Congress, Chairman Ben Bernanke cast some doubt on the strength and
sustainability of employment gains.

“The decline in the unemployment rate over the past year has been
somewhat more rapid than might have been expected, given that the
economy appears to have been growing during that time frame at or below
its longer-term trend,” he said. “Continued improvement in the job
market is likely to require stronger growth in final demand and
production.”

But Maki said it is not uncommon for employment data to diverge
from GDP and that the decline in the unemployment rate and the downtrend
in jobless claims (until very recently) show “solid, but not spectacular
growth.”

“It’s difficult to look at these things and say the economy is too
weak,” he said.

Levy observed that the Fed is “putting much more weight on bringing
down unemployment” than on inflation. And he said Bernanke “knows the
economy is improving but has understated that to the public.”

But “if we get another three or four months of healthy employment
gains,” Levy said financial markets will likely “start expecting the Fed
to change its signal” on the timing of hikes in the federal funds rate
from the current zero to 25 basis point range.

Levy said the Fed would be “misguided” if it were to do additional
asset purchases at a time when past reserve creation may be on the verge
of becoming “more powerful.” But he didn’t exclude the possibility
“because this Fed is so dovish about doing anything necessary to bring
unemployment down.”

Resler said “the case for doing anything now is weak.”

“The economy seems to be generating some genuine momentum,” Resler
went on. “If we continue at this pace, talk of quantitative easing will
fade.”

“I don’t think they’ll need to do more,” he said. “Whether they
need to do more or not, I don’t think it will have much impact, and if
they do, I don’t think it will be very large in scale.”

Having said all that, though, Resler said the FOMC still has “a
strong bias for action” should unemployment rise again.

Vitner said that “on the surface (the jobs data) would make it
harder for the Federal Reserve to do something.”

Nevertheless, Vitner said he wouldn’t be surprised to see the Fed
buy more MBS in the Spring just “to stay ahead of the widening of
spreads” between MBS and Treasuries and give housing “more of a push.”

“They don’t want to be blamed if the recovery falls short,” said
Vitner, adding that QE3 could well be undertaken “to make sure it
doesn’t get short-circuited.”

** Market News International **

[TOPICS: M$U$$$,MMUFE$,MAUDS$,M$$BR$]