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Prior to 8:30 this morning the 10 yr note and MBS prices were slightly better after the strong improvements yesterday. North Korea is rumbling and the US is responding with increased military readiness, investors turning more to safety in US treasuries. The early activity in the stock index futures markets before 8:30 were trading better after the strong selling yesterday, also a reaction over the North Korean’s threats. Yesterday a military leader in the country commented he now had the approval of the leaders of the country to attack the US and South Korea, the remark added additional emphasis to the on-going threats. Although the media and markets are taking the situation seriously, it is very unlikely North Korea will actually follow through with all the rhetoric. Overnight according to the WSJ the Obama administration is backing away from the increasing tough talk on concerns it is fueling even more aggressive threats frm the new N. Korean leadership.
At 8:30 this morning weekly jobless claims added more reality that the US economy isn’t growing in terms of job growth. Recently claims have been trending lower until last week when they increased, claims reported this morning were up 28K to 385K, the estimates were for claims to have declined 7K. Much of the recent economic data has been weaker than expected; both ISM indexes (manufacturing and services) were weaker than thought, now the claims are increasing more than thought. The reaction to the increase in claims took most of the early gains out of stock indexes and pushed the 10 yr yield down to 1.76%. The Labor Dept. pointed to the Easter holiday that varies each year making it difficult to smooth out swings in the data.
The ECB left interest range unchanged as expected; but Mario Draghi said the bank will keep monetary policy easy for an extended period and further easing is possible if the EU economies weaken further. “Our monetary policy stance will remain accommodative for as long as needed,”…. “In the coming weeks, we will monitor very closely all incoming information on economic and monetary developments and assess any impact on the outlook for price stability.'' He said risks to the economic outlook remain on the downside. The “consensus for the time being was not to look at rates.” Europe’s stock markets fell on his remarks of downside risks; yesterday Europe’s markets dropped the most in five weeks and today down more.
At 9:30 the DJIA opened +14, NASDAQ -3, S&P +1; the 10 yr note at 1.78% after trading at 1.76% at 9:00 am. 30 yr MBS price at 9:30 +12 bps.
Nothing left today as far as any potential market moving economic data. The North Korea news, if any, will get a lot of attention. Tomorrow the March employment report is going to influence how markets trade today. Investors will be positioning for what they expect. The present estimates are for non-farm jobs to have gained about 193K and private jobs +200K; the unemployment rate at 7.7% unchanged. The jump in weekly jobless claims this morning is not data taken into account for the March employment report.
More opinions from Fed officials; various Fed officials have had varying opinions about the economy, the QE buying, and employment. No solid consensus among many regional Fed presidents. Atlanta Fed Pres. Dennis Lockhart is saying he isn’t convinced the 2013 economy will outperform the economic gains of the last few years. Other regional presidents have other thoughts that the economy will be stronger this year. The economy will see “a continuation of the story that we’ve been living,” Lockhart said. “A modest pace of growth, inflation that is pretty well contained and a very gradual reduction in unemployment.” He also questioned the unemployment rate, suggesting the unemployment rate may not fall to 6.5% as Bernanke has used as a trigger to increase the FF rates. Lockhart saying the new normal for unemployment rate may be no lower than 7.0%.