Are the screens broken? In the ancient days of trading, frustration with a too quiet market that then surprisingly moved led to many a phone being slammed into green flickering computers screens, shattering into a spider’s web of glass. Positions and expectations clashed into the voice broker screams of missed orders and discontinuous prices. This has all changed with digital everything but for the emotions. There is a decided lack of movement ahead of the US non-farm payrolls mixed with awkward positions and the push of FOMO and TINA. Tight ranges in Foreign Exchange markets reflect lower volatility, but there are many different kinds of such - some linked to too much liquidity, others to lack of interest. At 8.31 am, this can all change. Hence the oddity of the fat-tailed distribution risks ahead with a break in 1.1200 or 1.1260 seen as likely to bring a 1.1165 for 1.1315 test in short-order and yet you can buy a 1.1250 EUR call for 7 pips. GBP which faces even more uncertainty next week thanks to politics and Brexit has seen its implied volatility drop to 10.6% from 14.15% last week (on the first exit day that never happened). This is even more odd give last month’s surprise US jobs report helped extend the fixed income rally that pushed the MOVE index to a 6-plus sigma event. This is the stuff of history for financial markets but this early morning is more about false calm and not broken screens just yet. Another reason to question the screen today is the news flows and the lack of excitement – as the US/China trade deal seems more likely in 4-weeks and as the Brexit delay letter to EU Tusk from UK May is sent asking for June 30 – of course, there is some pushback from France and there is the question about the EU May elections. However, the big two risks worrying markets in 2019 are lower now but have been priced efficiently for weeks. Holidays in Asia (Hong Kong and China and Taiwan all closed) make liquidity and interest lower. Throw in mixed economic data – weaker from Japan, stronger from Germany and you have the unsteady balance for the USD. This is the broken screen reaction to buying GBP on the rumor of delays and forgetting to sell it on the fact. 

Question for the Day: Does the Norway Sovereign Wealth Fund bond allocation matter? For today, the lack of bigger news stories and the surplus of present liquidity puts this decision from Norway to cut back on diversity to lower transactions costs and become more efficient that much more interesting. This all seems important to how bonds and FX markets will work into the next year and for how volatility is priced. The GPFG $1 trn fund is cutting emerging market government debt and corporate bonds in a $310bn shift in its fixed income portfolio. Bonds from Chile, the Czech Republic, Hungary, Israel, Malaysia, Mexico, Poland, Russia, South Korea and Thailand will be removed from the index, but the fund will still have leeway to invest up to 5 percent of its bond portfolio in emerging markets. The fund asked to divest holdings to EUR, USD, and GBP but was told by the Finance Ministry today to keep JPY, AUD, CAD and SEK denominated bonds as well. The white papers and findings from the FinMin go to the parliament next.   

What Happened?

• Japan February household spending drops to -2% m/m, +1.7% y/y after +0.7% m/m, 2% y/y – weaker than the -0.5% m/m, +2.1% y/y expected. The average income per household rose 4.2% m/m, 0.1% y/y in real terms to Y526,271. 
• Japan February leading indicators 97.4 from 96.5 - near forecasts. The coincident index rises to 98.8 from 98.1 – better than 97.5 expected. 

• German February industrial production rose 0.7% m/m, -0.4% y/y after revised 0% m/m, -2.7% y/y – better than the +0.5% m/m expected.  January revised higher from -0.8% m/m. The ex-energy and construction output fell -0.2% m/m. By sector, capital goods rose 0.6% m/m, intermediate fell 0.6% m/m, consumer goods fell 1.6% m/m. Energy fell 3.1% and construction rose 6.8% m/m. 
• French February trade deficit E4bn after E4.2bn – better than E4.7bn expected.  The C/A flips to deficit of E0.8bn after +E0.3bn – near expectations. 

• UK 4Q final productivity up 0.3% q/q after revised -0.2% q/q – better than 0.2% q/q expected. The 3Q revised higher from -0.4% q/q. 

Market Recap:

Equities: The S&P 500 futures are up 0.15% going for 7 - after a 6th day of gains up 0.21%. The Stoxx Europe 600 is flat while the MSCI Asia is up 0.2% in quiet trading due to holidays in China. 

• Japan Nikkei up 0.38% to 21,807.50
• Korea Kospi up 0.14% to 2,209.61
• Hong Kong Hang Seng closed for holiday
• China Shanghai Composite closed for holiday
• Australia ASX off 0.79% to 6,270.60
• India NSE50 up 0.59% to 11,665.95
• UK FTSE so far up 0.2% to 7,417
• German DAX so far flat at 11986
• French CAC40 so far up 0.2% to 5,475
• Italian FTSE so far up 0.3% to 21,776

Fixed Income: Better German IP, Brexit delay push and US/China trade hopes aren’t enough to move markets much – German Bunds 10Y yields flat at -0.01%, French OATs up 1bps to 0.38%, UK Gilts up 4bps to 1.13%. Periphery mixed with Italy off 1bps to 2.50%, Spain flat at 1.12%, Portugal up 2bps to 1.29% and Greece off 7bps to 3.54%. 

• US Bonds lower with equities bid, waiting for jobs– 2Y up 2bps to 2.36%, 5Y up 2bps to 2.34%, 10Y up 2bps to 2.53%, 30Y up 2bps to 2.94%. 
• Japan JGBs see curve steeper post BOJ despite weaker data– 2Y flat at -0.15%, 5Y flat at -0.16%, 10Y up 1bps to -0.03%, 30Y up 3bps to 0.55%. 
• Australian bonds sold on US/China trade hopes– 3Y up 2bps to 1.46%, 10Y up 4bps to 1.92%, NZ 10Y flat at 2.03%. 

Foreign Exchange: The US dollar index is flat at 97.30. Emerging Markets are mixed with Asia: INR off 0.45% to 69.265, KRW off 0.15% to 1137.75 while EMEA: ZAR up 0.25% to 14.087, RBU flat at 65.389, TRY off 0.1% to 5.592. 

• EUR: 1.1230 up 0.05%. Range 1.1218-1.1237. Stuck with 1.12-1.1260 keys and US data driver. 
• JPY: 111.75 up 0.1%. Range 111.60-111.80 with EUR/JPY 124.45 up 0.15% - weaker data but quietly waiting for US jobs and bonds. 
• GBP: 1.3060 off 0.1%. Range 1.3055-1.3122 with EUR/GBP up 0.15% to .8595 – still about Brexit with 1.30 pivotal. 
• AUD: .7115 up 0.1%. Range .7108-.7129 with NZD off 0.25% to .6740 – RBNZ expected to ease before RBA and positions in AUD/NZD shifting. 
• CAD: 1.3375 up 0.15%. Range 1.3349-1.3386 with focus on jobs today but 1.3250-1.3450 holding. 
• CHF: 1.0005 up 0.05%. Range .9985-1.0006 with EUR/CHF 1.1235 flat – watching 1.00 pivot for 1.0080 or .9880 still. 

Commodities: Oil off 0.1%, Gold flat, Copper up 0.05% to $2.9205

• Oil: $62.05 of 0.1%. Range $61.82-$62.25 with Brent $69.16 off 0.35%. On going Libya fears support prices against US data and demand doubts. $60-$63 consolidations in WTI. 
• Gold: $1294.00 flat. Range $1291.30-$1297.80 with focus on USD and rates with $1286-$1302 keys. Silver up 0.6% to $15.17, Platinum up 0.7% to $910.90 and Palladium off 1.1% to $1318.10. 

Conclusions: Will the jobs report matter? The short answer is yes as the FOMC is in wait-and-see along with markets today. The longer one is that the bands for excitement or reaction are wide so unless we get no big revision and a number below 120,000 or over 225,000 non-farm payrolls, its hard to see markets moving much. Even the focus on wages is less exciting unless we see a 4% y/y handle.  So the data of the report maybe more about the cycle and the economy with sector job change more interesting. The manufacturing focus and the US politics are mixed into the reaction functions of investors. This might be the stuff that moves markets on Monday.  

Economic Calendar:

• 0830 am Canada Mar employment change 55.9k p -10k e / rate 5.8%p 5.8%e / participation rate 65.8%p 65.7%e
• 0830 US Mar NFP 20k p 170k e / unemployment 3.8%p 3.8%e / hourly earnings (y/y) 3.4%p 3.4% / participation 63.2%p 63.1%e
• 0300 pm US Feb consumer credit $17.05bn p $18bn e