US job openings drop below 10mn

US economic indicators are starting to show signs of slowing in recent prints, with the outlook for the economy through the second half of the year weaker than the surprising buoyancy exhibited through the end of 2022 and the start of 2023. In the JOLTS data released yesterday the number of job openings in the US dropped below 10mn for the first time since 2021 as it fell to 9.9mn, down from 10.6mn in January and missing projections of 10.5mn. This is still indicative of a tight labour market and is unlikely to persuade the Fed against one more hike in the current cycle, but it could nevertheless be a sign that the jobs market’s defiance of gravity is starting to slip.

In other US data out yesterday, factory orders declined 0.7% m/m in February, a bigger fall than the consensus prediction of a 0.5% drop. The January growth figure was revised downward from a 1.6% contraction on the initial print to a fall of 2.1%. Stripping out the volatile transport component, the February contraction was 0.3%, compared to predictions of no change. Meanwhile, the February durable goods orders growth figure was confirmed at -1.0% m/m on the final reading.

The Reserve Bank of Australia held its cash target rate steady at 3.60% at its meeting yesterday, as it wanted a pause to take assessment of any lagged effects of the tightening it has already implemented. However, it cautioned that ‘some further tightening’ could yet be required as it looks to dampen inflation back towards its target levels. CPI inflation was 6.8% y/y in February, compared with the RBA’s target of an average of 2.0%-3.0%. The Reserve Bank of New Zealand made its rate decision earlier this morning, where it hiked by 50bps to 5.25%. The decision exceeded expectations, which had been for a quarter point move. The bank said that ‘inflation is still too high and persistent, and employment is beyond its maximum sustainable level.’

Today’s Economic Data and Events

• 10:45 France industrial production, March, % m/m. Forecast: 0.5%

Fixed Income

• US Treasuries pushed higher in the US session after a disappointing JOLTS report supported views that the Fed will end its hiking cycle soon and perhaps implement rate cuts by the end of the year. The 2yr UST yield dropped by 14bps overnight to 3.8253% while the 10yr yield fell 7bps to 3.3387%. Markets are only pricing a 50% chance of a 25bps hike at the May FOMC meeting before rates begin to move lower from July.
• Loretta Mester, president of the Cleveland Fed, said rates will need to get “above 5% and the real fed funds rate staying in positive territory for some time” to get inflation down to the Fed’s 2% target. Mester also seemed to push back against any expectation of rate cuts being implemented by the Fed this year.
• European bonds closed generally unchanged with bund yields at 2.242% and 10yr gilts at 3.428%.
• The Kingdom of Jordan priced a 5yr USD 1.25bn bond at 7.75%.

FX

• It was another day of dollar weakness overnight as fading rate expectations helped to support peer currencies against the US dollar. EURUSD added 0.5% overnight to close at 1.0953 while GPBUSD jumped by 0.7% to 1.2501, its strongest level since June last year. USDJPY also pushed lower, down 0.6% to 131.71.
• NZDUSD has seen a surge this morning, up by 0.9% to 0.6367 as the RBNZ hiked by 50bps, more than expected. AUDUSD closed lower overnight, down 0.5% to 0.6751 while USDCAD settled flat at 1.3445.

Equities

• Renewed concerns around the banking sector in the US, stoked by some high-profile commentary, weighed on equity markets yesterday, with all three benchmark indices closing lower despite the weak jobs report. The NASDAQ lost 0.5%, while the Dow Jones and the S&P 500 both closed down 0.6%.
• There was little concrete direction in Europe: the DAX closed up 0.1%, the CAC closed flat, and the FTSE 100 lost 0.5%.
• Locally, the ADX closed flat and the DFM added 0.5%.

Commodities

• Oil markets took an apparent breather overnight with small changes by the standards of the last few days. Brent closed flat at USD 84.94/b while WTI added about 0.4% to USD 80.71/b. Both are still pushing higher in early trade today.
• The API reported a draw of 4.3m bbl in crude inventories last week along with decent draws in both gasoline and distillate inventories.