US Futures Flat Ahead Of December Payrolls, Dollar Rebounds

European shares fell modestly, Asian equities declined for the first day in three, and US equity futures were unchanged before the December U.S. nonfarm payrolls report. China’s offshore yuan fell the most in a year to pare a record weekly rally, while Mexico’s peso climbed after the central bank sold dollars. Oil was trading lower in early trading. The main economic event on the financial calendar is today's 8:30am ET December payroll report. The market consensus for today’s print is 178k which is in line with the 178k in November. It’s worth noting that there’s a reasonable range between economists though with the low forecast at 125k and the high forecast at 221k. DB's Joe LaVorgna is at the lower end of the range and has pegged a 150k print which is more or less where yesterday’s ADP private employment survey came in at for December (153k vs. 175k expected). What might be more interesting though is whether or not the drop in the unemployment rate is sustained. As a reminder the U3 rate fell to 4.6% in November and the lowest since 2007 from 4.9% in October. The drop has been a focus for Fed officials with more talking about an undershooting of the longer run rate so it is worth watching. As always also keep an eye on average hourly earnings. The consensus is for a +0.3% mom rise in December which would have the effect of pushing the annual rate up to +2.8% yoy from +2.5%.
Should the report come in stronger than expected and provide evidence of a healthy U.S. labor market, we could see a second wind to a flagging dollar hit by doubts that Donald Trump will usher in an era of fiscal easing and rapid growth. The employment report is expected to confirm a sixth straight year with more than 2 million jobs added, which may help to stem the steepest losses on a Bloomberg gauge of 10 major currencies this week. Market positioning in options signals the dollar is poised for further gains against the euro...

Ahead of the report, world stocks held near 1-1/2 year highs and the dollar moved up from a three-week low on Friday, with investors looking to upcoming U.S. jobs data to provide clues on the pace of U.S. interest rate rises this year. The MSCI's gauge of the world's stock markets hit its highest since July 2015, taking its gains so far this year to 1.7 percent, helped by this week's generally upbeat economic readings in the U.S., China and Europe. The yen, euro and British pound all weakened for the first time in three days and the Turkish lira extended its loss. European equities declined the most in a week and U.S. futures signaled losses, while the MSCI Asia Pacific Index declined for the first day in three. The three-month interbank lending rate for the offshore yuan rose to a record in Hong Kong.
Weaker-than-expected private-sector ADP payrolls data on Thursday contributed to the dip in the dollar, despite strong data elsewhere. Investors were looking to today's jobs figures to see if the bounceback for the dollar could be sustained. "It's likely that a stronger jobs number will, in the shorter term, strengthen the dollar. But (soon) people will start questioning how much of a strong dollar the Fed can stomach," ETF Securities' head of research and investment strategy, James Butterfill, told Reuters. "Given the sell-off in the dollar, there could be appreciation over the next few weeks, but in the coming few months we could see further dollar weakness." Already under pressure as the Trump rally wanes, the dollar extended losses on Thursday as China stepped up efforts to support the yuan, sparking speculation that it wants a firm grip on the currency ahead of Trump's Jan. 20 inauguration. The cost of borrowing the yuan in Hong Kong, the main offshore yuan trading center, sky-rocketed and at one point hit 105%, making it too costly for speculators to sell the yuan against the dollar...

The offshore yuan has gained more than 2 percent in the last two sessions, its biggest two-day gain on record, to a two-month high of 6.7833 per dollar before it eased back about 1 percent in Asia on Friday to 6.8610. Having posted its biggest gain for 7 months, of 1.1 percent, in the previous session, it fetched $1.0589 EUR= on Friday. "What's going on is a correction of the 'Trump trade' since the election. The markets have been trying to fully price in his policies just based on hopes," Standard Chartered's executive director of finance, Koichi Yoshikawa, said. "From now on, it's not going to be a simple one-way bet."
Investors also closed short positions in U.S. bonds, one of the most popular plays since the election because Trump's policies are seen as stoking inflation. Oil prices were steady as Saudi Arabia and Abu Dhabi stared promised supply cuts, but doubts that all producers will implement output reductions agreed in a landmark OPEC deal last year kept markets from rising further. Gold retreated 0.4 percent to $1,175.17 per ounce after a three-day, 2.9 percent climb. Bitcoin slumped again and was trading at $900 at last check. In rates, Australian bonds climbed, sending 10-year yields down five basis points to 2.68 percent, a level last seen in November; similar New Zealand rates dropped five basis points to 3.19 percent. U.S. Treasuries rallied Thursday by the most since the post-Brexit jolt, with the yield on the 10-year benchmark falling nine basis points to 2.34 percent. That was the biggest drop since June 27.
# Markets Snapshot;

• S&P 500 futures down less than 0.1% to 2262
• DAX down 0.2% to 11561
• German 10Yr yield up less than 1bp to 0.25%
• Italian 10Yr yield down 2bps to 1.92%
• Spanish 10Yr yield up 2bps to 1.5%
• Nikkei 225 down 0.3% to 19454
• Hang Seng up 0.2% to 22503
• Shanghai Composite down 0.4% to 3154
• US 10-yr yield up less than 1bp to 2.35%
• Dollar Index up 0.08% to 101.6
• WTI Crude futures up 0.9% to $54.25
• Gold spot down 0.2% to $1,178
• Silver spot down 0.6% to $16.49

# Global Headline News;

• Carlyle Said to Explore Sale of Vitamin Maker Nature’s Bounty: Company said to be valued at about $6 billion
• China Said to Mull Scrutiny of U.S. Firms Amid Trump Tension: Options include antitrust, tax probes of American companies
• Trump Axing Obama Power Plan Means Coal Supplying 61% More Power: U.S. would use 523 billion kilowatt-hours more of electricity generated from coal in 2050 if Obama’s Clean Power Plan is dropped
• Trump Hits Toyota on Mexico as Car Criticism Spreads to Japanese: threatens to tax Toyota into building a plant in the U.S. instead
• FBI Says Democrats Refused Access to Hacked E-Mail Servers: Trump scheduled to be briefed Friday on campaign breach
• Marchionne Enters Final Push to Free Fiat Chrysler From Debt: Executives have expressed increasing confidence at recent investor meetings that they’ll reach their goals, according to people familiar
• Mylan’s EpiPen Sales Plan: Schools Today, Everywhere Tomorrow: wants to set up its own pharmacy to cut out middlemen and lobby for new laws that could expand sales of its biggest product
• Boeing Said Close to $10.1 Billion Order From India SpiceJet: Deal for 92 jets may grow based on outcome of negotiations
• Brevan Howard’s Hedge Fund Posts First Gain in Three Years: Returns 3% according to an investor letter
• McDonald’s Japan Same- Store Dec. Sales Rose 17% Y/y; 2016 Same-Store sales rose 20%
• Frontier Airlines Said to Aim to Raise About $500m in IPO that would imply a valuation of ~$2b company: NYT
• Morgan Stanley Said to Cut Equities Traders’ Bonus Pool Up to 4%: Firm is set to pay annual bonuses to employees next month

*) In Asian markets, stocks traded mixed following a lacklustre lead from Wall Street where financials underperformed, although the NASDAQ 100 still finished positive on strength in pharmaceuticals and FANG stocks. Asian stocks decline for first day in three. With MSCI Asia Pacific down 0.3% today it’s still headed for its best start to a year since 2010. Hong Kong stocks post their biggest weekly advence in three months. 6 out of 11 sectors drop as retail, material stocks underperform, real estate, telecoms outperform. Asian bourses were also indecisive as participants were tentative ahead of NFP, with Nikkei 225 (-0.3%) dampened by JPY strength and losses in Fast Retailing after Uniqlo same-store sales fell 5% Y/Y in December. ASX 200 (Unch.) was uneventful and traded flat while the KOSPI (+0.3%) was underpinned by better than expected Q4 preliminary results from Samsung Electronics. Chinese markets were mixed with the Hang Seng (+0.2%) led by energy names, while Shanghai Comp (-0.4%) lagged following a large net weekly drain of CNY 595BN by the PBoC. 10-yr JGBs traded higher amid the dampened risk sentiment in Japan with the yield curve flatter on outperformance in the long end, while the recent weekly securities transactions data also showed foreign investors returned to net buying of Japanese bonds.
# Top Asian News;

• Tata Sons Calls Shareholders Meeting to Oust Mistry From Board: Extraordinary general meeting scheduled to be held Feb.
• Bitcoin Buyers Eye Beijing Nervously as Price Drops Off High: Yuan accounts for 98% of bitcoin trading due to zero fees
• Wartime Sex Slave Dispute Resurfaces to Rattle Japan-Korea Ties; Tokyo suspends talks with Seoul over a foreign currency swap arrangement; temporarily recalls ambassador to South Korea; halts high-level economic talks
• Fiery Booze Drinkers Drive China’s Biggest Gains in Stocks: consumer staples surge led by baijiu-makers Moutai, Wuliangye
• China Seen Keeping Reserves Near $3 Trillion to Avoid Alarm: Stockpile is seen holding above key level for December

*) In Europe equity markets (Stoxx600 -0.1%) are trading mildly in the red as mining underperform in the FTSE 100 (flat) in what has been a particularly quiet session ahead of NFP. Stoxx Europe 600 Index declines 0.3% as travel & leisure, utility and commodity stocks underperform; real estate stocks gain. 18 of 19 sectors decline. 31% of Stoxx 600 members gain; 56% decline. Financials are the outperforming sector after some notable broker moves for Worldpay (WPG LN) and Lloyds (LLOY LN), subsequently both Co.'s are at the top of the FTSE leader board. Fixed income markets have not seen too much action thus far, with Bunds trading lower by 8 ticks and in the periphery 10 year PGB yield has found support at the 4% psychological area.
# Top European News;

• Sanofi Shares Slump After Amgen Wins Ban on Cholesterol Medicine: Court ruling blocks Sanofi and partner Regeneron Pharmaceuticals from selling the cholesterol-lowering medicine Praluent in the U.S. because it infringes Amgen’s patents
• Euro-Area Confidence Jumps to Highest Since 2011 on ECB Stimulus: recovery in the 19-nation region showed further signs of strengthening
• Draghi’s German Problem Flares as Inflation Jump Stirs Anger: Germans fret that the guardian of price stability will let them down
• BOE’s Haldane Says ‘Fair Cop’ to Getting Brexit Forecasts Wrong: Says economists have a lot of work to do to recover from failed predictions over the global financial crisis and Brexit
• U.K.’s May Tries to Charm Trump, Hoping for Early 2017 Meeting: Premier’s chiefs of staff made secret trip to U.S. in December
• TP ICAP Shares Soar After U.S. Election Boosts Revenue Growth: Company says 2016 revenue will probably rise 12% to 796 million pounds
• France Sees Three-Way Race for President as Fillon Bounce Fades: Independent Emmanuel Macron gains support, Socialist Party’s Valls would be well out of run- off range

*) In currencies, the offshore yuan fell 1.1 percent to 6.8599 per dollar after a four-day climb. The onshore yuan fell 0.6 percent. The euro declined 0.2 percent to 1.05843 per dollar and the pound was down 0.3 percent at 1.23793. The Bloomberg Dollar Spot Index rose 0.2 percent after falling 1 percent Thursday in its biggest slide since July on a closing basis. Companies added fewer jobs than forecast in December, according to a private research group. The yen fell 0.7 percent to 116.18 per dollar after strengthening 1.7 percent Thursday. The Aussie and kiwi dropped 0.3 percent and 0.2 percent, respectively. South Korea’s won lost 0.6 percent. Mexico’s peso jumped 0.5 percent after Banxico sold dollars to bolster the exchange-rate. The currency Thursday erased an advance of 1.5 percent after Trump threatened Toyota Motor Corp. with a border tax for planning to build a factory in Mexico. The Turkish lira was down 0.8 percent at a record low 3.6226 per dollar following a 0.6 percent drop the previous day.
*) In commodities, crude was down 0.4 percent at $53.55 a barrel after climbing 0.9 percent Thursday following a report that Saudi Arabia is cutting production as it implements an agreement to ease a global supply glut sparked the turnaround. However, further gains have been struggling on trader caution over OPEC implementation of last year's output agreements. This morning there have been reports of Kuwait making a larger cut in production than required. Oil pushed higher but holds off weekly highs. Performance in base metals also staggering, and with recent gains all on fiscal spending hopes, while Gold prices come off better levels, but marginally so as yet. Gold retreated 0.4 percent to $1,175.17 per ounce after a three-day, 2.9 percent climb....