• April non-farm payrolls 115K vs 160K exp
• Revisions add 53K over past two months
• Unemployment rate falls to 8.1% as participation rate drops
• Canada Ivey PMI 52.7 vs 61.0 exp
• Rumor Spanish banks asking for another LTRO
• Final poll: Sarko 48%, Hollande 52%
• Fed’s Williams expects 2.5% growth in 2012
• Venizelos: elections to decide if Greece stays in euro
• Citi expects BOE to do ₤25-50 billion in QE next week
• S&P downgrades Spanish regions
• WTI crude falls $4 to $98.53 — a 10-week low
• S&P 500 down 1.6% to 1369, down 2.4% on week

The market didn’t know what to do with the non-farm payrolls report at first but the eventual takeaway was decidedly negative. EUR/USD climbed to 1.3179 but offers at 1.3180 kicked in and beat the euro down to 1.3080.

USD/JPY whipsawed ahead of the NFP data, raising the ire of those suspecting the number was leaked moments early. The pair bounced to 80.39 but steadily declined to 79.83 afterwards.

Cable was choppy before healing lower as flows in EUR/GBP and stop-hunting sent the pair above 1.62 before a retreat to 1.6142.

USD/CAD legged higher on the employment report to 0.9920 and then to 0.9960 after the Ivey PMI and as stock sank.

By Kasra Kangarloo

WASHINGTON (MNI) – The week ahead features the Producer Price
Index and the monthly international trade balance as well as
consumer confidence and some second-tier data.

The March trade balance report, to be released Thursday at 8:30
a.m. ET, will be watched for its possible effect on the second estimate
of first-quarter GDP, since this figure is only estimated by the
Commerce department in the advance report. Since the expectation is for
a significant widening in the trade deficit, any less negative
surprises could mean a meaningful upward revision to GDP.

Initial jobless claims will also, as always, be worth watching, as
the previous week’s data showed a surprise drop in claims, possibly
indicating a reversal in the recent upward trend. The past month’s climb
in claims, which peaked at 392,000 the week ending March 20th, has been
concurrent with weaker payrolls data. A downward trend in claims, if it
takes hold, would likely indicate renewed strength in the jobs market.

Initial jobless claims will be released Thursday at 8:30 a.m. ET.
Other jobs data include JOLTs job openings and labor turnover survey, to
be released Tuesday at 10:00 a.m. ET, and the employment trends index,
to be released Monday at 10:00 a.m. ET.

The University of Michigan consumer confidence report, to be
released Friday at 9:55 a.m. ET, will likely be a reflection of
confidence in the labor market, as the last two months of payrolls data
have showed a slowdown in jobs growth. The last confidence report,
however, showed a surprise to the upside. In the past couple months
consumer concerns have been more focused on the effect of gas prices on
incomes.

The IBD/TIPP economic optimism index, another consumer confidence
report, will also be released Tuesday at 10:00 a.m. ET. Though the
report does not move markets, directional changes are often reflected in
similar releases by the Conference Board and the University of Michigan.

Inflation data, which includes the Producer Price Index and import
prices, are expected to show more or less the same trend seen for the
past year or so — restrained, modest core inflation, with some possible
swings off volatile energy prices.

The Producer Price Index will be released Friday at 8:30 a.m. ET
and import prices will be released Thursday at 8:30 a.m. ET.

Other economic releases over the week include consumer credit on
Monday at 3:00 p.m. ET, the National Federation of Independent Business’
small business optimism index on Tuesday at 7:30 a.m. ET, the Mortgage
Banker Association’s mortgage applications index on Wednesday at 7:00
a.m. and the Treasury deopartment’s budget statement on Thuesday at 2:00
p.m. ET.

The week’s Federal Reserve speakers are:

Federal Reserve chairman Bernanke will deliver a speech titled
“Banks and Bank Lending: The State of Play” at the Chicago Federal
Reserve’s annual conference on bank structure and competition on
Wednesday at 9:30 a.m. ET.

Richmond Federal Reserve president Lacker will be speaking on
“Technology, Unemployment and Workforce Development” in North Carolina
on Monday at 7:15 p.m. ET.

Dallas Federal Reserve President Fisher will speak on a panel in
Dallas, Texas on Tuesday at 12:45 p.m. ET.

Minneapolis Federal Reserve president Kocherlakota will speak to
the Economic Club of Minnesota on monetary policy in Minneapolis, MN on
Wednesday at 10:00 a.m. ET and then again on Thursday at 1:20 p.m. ET.

Cleveland Federal Reserve president Pianalto will speak to the
Women’s Business and Leadership Conference in Lexington, Kentucky at
10:45 a.m. ET.

Philadelphia Federal Reserve president Plosser will speak at a
banking conference in Philadelphia, PA on Wednesday at 12:00 p.m. ET.

– Kasra Kangarloo is a reporter for Need to Know News

** MNI Washington Bureau: 202-371-2121 **

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

It’s official CAD is the darling of the currency market as net longs in the CFTC weekly Commitments of Traders report knock AUD off the top spot. Other highlights:

• EUR shorts -107K vs -113K prior
• JPY shorts -50K vs -56K prior
• GBP longs +16K vs +8K prior
• AUD longs +52K vs 46K prior
• CAD longs +70K vs +44K prior
• NZD longs +8K vs +9K prior
• CHF shorts -14K vs -16K prior

Overall the net USD long position was down 33% to $12.7 billion. The data reflect the close on Tuesday.

US DATA: April STRIPS +$1.676b and +$1.886b ex maturing securities.
The 3.125% of Feb’42 had $1.5b stripping.

A Reuters poll of the 14 primary dealers sees a 32% chance of the Fed eventually announcing QE3.

‘Eventually’ is a long time. I would put the chance in the next year at 5%. The economy can muddle along without QE3 and I don’t see the Fed coming to the rescue of Congress goes stupid after the elections.

Gun to your head, what chance do you see of QE3?

Charlie Munger is Warren Buffett’s partner…

• Madrid cut to BBB+ from A
• Galacia to BBB+ from A
• Canary Islands from BBB+ from A
• Andalusia to BBB from A
• Aragon to BBB from A
• Balearic Islands to BBB- from A-
• Catelonia to BBB- from A-

1. EIA data showing US storage at highest since 1990
2. OPEC Sec says unhappy with high prices, pumping 2.3 mbpd above quotas
3. CME hikes oil margins, later gets 90-day reprieve
4. US and European economic weakness

WTI crude touched as low as $97.53 but has rebounded above $98.

Bloomberg reporting

C’mon, can ya really blame them?

–Repeating Story Sent at 08:30 to Correct Unemp Rate in Headline
–Unemploy Rate Dips as Does Labor Force; Hours-Wages Gain

By Joseph Plocek

WASHINGTON (MNI) – The U.S. April employment report was mixed,
marking another modest month of growth after jobs slowed in the spring.

April payrolls printed +115,000 but February-March revisions
totaled +53,000, putting the overall picture about as expected.
(Analysts had expected about +165,000 April jobs.)

The unemployment rate continued to fall, and was down another 0.1
point to 8.1%, a low since 7.8% in January 2009. But that reflected
further slippage in labor force participation, now 63.6%, a low since
1981. While it is possible alterations in demographics see the Baby Boom
generation retiring early because of slow hiring, this trend remains
disturbing.

Payrolls included: manufacturing +16,000, construction -2,000,
retail +29,300 (though the Labor Department said there was “no
definitive trend in recent months” for stores and +4,600 was in home
stores where weather was better), healthcare +19,000, restaurants
+19,700, and temporary help +21,100.

Transportation printed -16,600, and included -11,000 for ground
passenger transport. A Bureau of Labor Statistics economist noted the
Easter school holiday fell in the reference period, and said layoffs of
school bus drivers could have accounted for the dip.

Government posted -15,000 jobs, mainly in local education. This
meant private payrolls printed +130,000.

Private Average Hourly Earnings rose 3 cents and hours gained,
foretelling rises in incomes and production ahead.

So overall this report suggests more modest growth. Jobs have
averaged +135,000 in the last two months, compared with +229,000 a
month from November to February. This suggests either a repeat slowing
of the U.S. economy in spring or an on-going problem with properly
adjusting data for warm weather and Easter.

Details: Payrolls/Prior Pv AHE,yoy Agg Hrs Civ Unempl Rt/Unrnd
Apr +115k —- +1.70% 103.6 8.1% (8.0977%)
Mar +154k +120k +1.76% 103.5r 8.2% (8.1916%)
Feb +259k +240k +1.60% 103.3 8.3% (8.2688%)

** MNI Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MAUDS$,MT$$$$,MAUDR$]

52-48 is Hollande lead in this poll.

Perhaps we’ll see some small short-covering on the news from session lows about 1.3080…

• Greece must be an equal partner with the EU
• Majority of Greeks want a pro-European government

Is it just me, or does that photo make you think Venizelos will eventually end up in a five drachma foot-long commercial?

By Yali N’Diaye

WASHINGTON (MNI) – Having recently invited itself to the municipal
bond table, Kroll Bond Ratings is contemplating the bigger
responsibility of assessing sovereign credits “in the future,” President
and Chief Operating Officer James Nadler told MNI.

“It is a huge responsibility to rate sovereigns,” Nadler said.

However, he pointed out that “The incumbent rating agencies have
been more of a lagging indicator which is of no help to investors.”

That might leave some space for Kroll Bond Ratings.

So, “We are exploring the idea of rating sovereigns in the future
but will not unless we are comfortable that we can add value for
investors,” he said.

The rating agency has boosted its efforts to expand in size,
sectors covered, as well as geographically.

“Our plan is to be a full-service global rating agency,” Nadler
said. “So we are looking at every opportunity to expand through
acquisitions.”

Jules Kroll, the agency’s chairman and CEO, is no stranger to such
strategies.

Nadler pointed out that in his past experience at Kroll
Investigations, Kroll made 26 acquisitions from the time he started the
company in 1972 until 2004, when he sold his company to Marsh &
McLennan.

Earlier this week, Kroll has indicated his acquisitions would be
international.

Asked to specify, Nadler told MNI, “Currently, Kroll is more
focused on Europe to move into over the next year but plans to expand
into other locations including Asia in the near future.”

But to become “full-service,” the agency also needs to widen its
presence across sectors.

On that front, Kroll Bond Ratings made its entrance in the
municipal bond space at the end of March, with a double-A assigned to
the long-term general obligation debt of the State of Connecticut, the
wealthiest state in the nation.

“You will see more public finance rating over the summer,” Nadler
later told MNI.

Jules Kroll has also indicated he plans on rating bond insurers, a
natural development when looking at the municipal bond sector, where
issuers routinely relied on monolines to enhance their credit profile to
borrow cheaper on the market.

That, however, was before a wave of downgrades of bond insurers
during the financial crisis took away the very reason — triple-A
ratings — monolines were used by municipal issuers.

As of now, in addition to public finance, Kroll Bond Ratings is
present in Structured Finance where the big rating agencies have mostly
failed as revealed by the financial crisis.

“We believe this will continue to be a fast growing market for
Kroll,” Nadler told MNI. “We are looking to expand into the ABS space as
well and currently have methodologies available on Auto Loan ABS and
Leasing Containers.”

The firm has rated 11 commercial mortgage-backed securities
transactions, 2 residential MBS transactions, and has 1 Public Finance
rating outstanding on the State of Connecticut.

The chairman has also publicly said he plans on rating corporates
this year, first focusing on financial issuers.

“One need to look no further than the financial crisis to see that
new thinking is needed in terms of the analysis and rating of today’s
complex financial institutions,” Nadler told MNI when asked to explain
the decision.

** MNI Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MR$$$$,MFU$$$]

Levon Helm and now Adam Yauch of the Beastie Boys, both died of cancer.

‘Financial executives are worried about tougher regulations should Socialist leader Francois Hollande win the French presidential election. They should be.’

Der Spiegel.

EUR/USD as follows the stock market to a fresh low. USD/JPY and the commodity bloc is still holding up.

The late-day euro trade will be all about the election. I don’t think the market is going to be too worried about a Hollande win unless he makes some bold anti-euro statements in his victory speech. The bigger risk is a Sarkozy upset, which might create a 100+ pip rally in EUR/USD.

It’s not like you had a choice, Herr Schaeuble.

By Chris Cermak and Kasra Kangarloo

WASHINGTON (MNI) – The weaker-than-expected headline April payrolls
number released Friday left far from settled whether we are seeing signs
of a new slowdown in the U.S. economy, or simply consolidation of steady
improvement, that appears softer due to the overly ambitious job gains
at the start of the year.

For some economists, April’s numbers signal ongoing problems with
seasonal adjustments, fueled by an early Easter and unseasonably warm
winter weather. Other analysts look at last year’s spring slowdown and
wonder whether this could be deja vu all over again, in the words of
Yogi Berra.

Nor has the latest report settled the key debate over whether the
Federal Reserve should or will consider a fresh round of quantitative
easing to give employment another lift. Most analysts seem to think the
report may increase talk of QE3 but note the bar remains high for the
Fed to actually pull the trigger.

Overall non-farm payrolls rose 115,000 (130,000 private) which
marked the lowest monthly level since November and came below
expectations in MNI’s survey of a 165,000 gain. But upward revisions
totalling 53,000 to the prior two months left the market reaction muted.

“On balance, this report leaves us exactly where we were before
today, in a sort of economic limbo,” Stephen Stanley of Pierpont
Securities said in a research note. “Conditions are not weak enough to
allow the doves at the Fed to give the markets yet another liquidity
hit, as they crave. However, we are far from out of the woods, as GDP
growth is right around trend and labor market slack is not being
absorbed nearly fast enough to please policymakers (or anyone else).”

The mixed employment bag — together with the lower-than-expected
2.2% GDP print for the first quarter — leaves economists and traders to
waffle for the time being and hope May’s payroll report brings more
clarity, with forecasts likely to range as widely as they did in April.

Until some clarity comes, just how bad or good the situation is
depends on your perspective, and which longer term trend you use to back
up that naturally sunny/downcast disposition.

For Credit Suisse, the downshift after average winter gains of
250,000 “should not be a huge surprise.” The April figures signal
“consolidation, not the start of a prolonged slowdown. Job growth ran
too far too fast ahead of private sector final demand for a period of
time.”

Scott Brown, economist at Raymond James, also makes the case that
the mild winter months effectively stole job gains from the spring
months. Though his overall assessment was somewhat less optimistic — he
still described the report as largely a disappointment — he also added
that roughly the same trend was seen last year due to the impact of
gasoline prices on small business hiring.

“It’s probably going to be a mixed bag,” Brown told MNI in a
telephone interview. “You’ll get a couple strong months, you’ll get a
couple weak months, it’s essentially more of the same as last year.”

Though slightly more to the sunny side, Russel Price, economist at
Ameriprise Financial Inc, also noted the temporary jump in gasoline
prices as the real culprit in this month’s figures. He added that
economic fundamentals are still strong and should continue to improve
off consumer spending.

“I think (the jobs market) will continue to improve, primarily
because consumers are generally still spending,” Price told MNI in a
telephone interview. “With the decline in gasoline prices, consumer
confidence should rise further, so eventually businesses will have to
hire to respond to that increase in demand.”

Not so rosy, the Royal Bank of Scotland in a research note sees the
numbers “confirming that the momentum of the labor market seen around
the turn of the year has faded.”

It notes private payroll gains are about on a par with the average
144,000 pace seen from June-November 2011 and marks a pace “more
consistent with an economy expanding close to trend.”

Goldman Sachs also takes the more negative view, noting “if there
was one consistent message in today’s report it was weak growth” and a
“loss of momentum.” While there was clearly some weather payback,
Goldman says “underlying job market weakness explains a little more of
the below-consensus payroll gain than we had expected.”

The sectoral breakdown of job gains/losses offers even more of a
mixed bag. On the positive side, retail jobs increased 29,300 after
falling 21,000 in March, while a BLS economist said a 16,600 drop in
transportation could partially be accounted for by school bus driver
layoffs, as the Easter school holiday fell in the reference period.

CRT Group’s David Ader notes that 83,000 jobs from 115,000 added
came from retail, temporary hires and education that are not exactly
“high quality jobs.” Ader says “this is discouraging and support the
idea that the pace of growth has moderated significantly.”

Federal Reserve Chair Ben Bernanke has seemed to fall somewhere
closer to the “consolidation” camp in the past month, though all eyes
will be on whether Bernanke and other Fed officials change their tone in
the coming weeks.

Bernanke told reporters in his April press conference that weather
likely “made January and February artificially strong and March
artificially weak,” and it is more likely that jobs are growing at a
150,000 to 200,000 pace. Most analysts would agree QE3 is unlikely if
that kind of pace holds in coming months.

RBS says “the hurdle additional Fed accommodation this summer
remains high,” though the April report “will keep hopes for QE3 alive.

Yet BNY-Mellon in a note says the “the headline disappointment
increases the likelihood that Bernanke will move forward with QEIII
later this summer.” This is true even if the April slowdown has “all of
the hallmarks of a correction in a longer-term uptrend.”

At the very least, all sides can agree that the decline in the
unemployment rate to 8.1% from 8.2% in March is not a good sign, since
it was driven by another drop in the labor force participation rate to
63.6%, the lowest level since 1981.

Nomura says the falling participation rate in itself is something
that could “bring more discussion” of QE3 into the Federal Open Market
Committee’s June meeting. The report “definitely highlights the
challenges for monetary policy: the fact that the unemployment rate fell
illustrates in a sense that there is reduced “slack” in the labor
market, but it appears to be falling for the ‘wrong’ reasons.”

Christoper Low of FTN Financial agrees the falling participation
rate, together with weak hourly earnings that were virtually unchanged
in April, “are — or should be, anyway — the most important aspects of
this report” from the Fed’s point of view.

–Chris Cermak and Kasra Kangarloo are reporters with Need to Know News

** MNI Washington Bureau: 202-371-2121 **

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

• Says many people will re-join the labor force as the economy improves

Bernanke, on April 10, said the JOLTS job openings data is a great indicator of underlying employment market and said it makes him skeptical of recent jobs gains. The March JOLTS data will be released Tuesday.

Comparing the JOLTS data to the unemployment rate shows a solid inverse relationship but somewhere around 3600-3800 would make Bernanke much more comfortable.