Traders Eye 45-Minute Window After Good Friday Report
|April 5th, 2012, 06:15 PM||#1 (permalink)|
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Traders Eye 45-Minute Window After Good Friday Report
Wedbush Securities Inc.’s Michael James will be up at 5:30 a.m. in Los Angeles tomorrow, even though equity markets are closed for a holiday and he doesn’t have to work. The reason for the early wake-up: jobs.
While stock markets around the world are shut for Good Friday, the Labor Department will publish its monthly employment report at 8:30 a.m. New York time. Equity traders will have 45 minutes to react, as trading of futures linked to the Standard & Poor’s 500 Index and Dow Jones Industrial Average will continue until 9:15 a.m. on CME Group Inc. (CME)’s Chicago Mercantile Exchange.
“It’s too important,” James, managing director of equity trading at Wedbush, said in a telephone interview on April 2. “People, whether they’re working or not, whether they’re on the buy-side or sell-side, are going to be paying attention to the number and the reaction in the futures.”
The U.S. economy added 205,000 jobs in March, according to the median estimate of 80 economists surveyed by Bloomberg before the report. That would be the fourth straight month employers added more than 200,000 workers, according to data compiled by Bloomberg.
The Labor Department usually publishes the report on the first Friday of every month. The timing of Good Friday depends on the cycles of the moon. The New York Stock Exchange has closed every year for the holiday since 1885, except in 1898, 1906 and 1907, according to Eric Ryan, a spokesman.
“The stock markets can’t tell the government when to release the data, and the government can’t mandate that stock markets be open,” James said. “It’s an unfortunate confluence of dates.”
Stacey Standish, a spokeswoman at the Bureau of Labor Statistics in Washington, said in a telephone interview the Labor Department is releasing the employment numbers because the federal government is open that day.
The last time the monthly employment report coincided with Good Friday was 2010. U.S. stock-index futures, yields on 10- year Treasuries (USGG10YR) and the dollar rose on April 2, 2010, after the report showed employers added the most jobs in three years. S&P 500 futures rose 0.3 percent, while Treasuries fell, driving the yield on 10-year notes up to 3.94 percent.
Among the biggest nations, only Russia’s equity market will be open when the report comes out. Exchanges from London and Sao Paulo to Toronto and Paris will be shut. While bourses in China and Japan will be open tomorrow, they will have closed by the time the report is published.
Bets on Gold
U.S. commodity markets will be shut. Traders will be able to place bets on gold for immediate delivery in London after the employment report is released. The Securities Industry and Financial Markets Association recommended that trading in fixed- income securities end at noon in New York, opting for an early close rather than a complete shutdown because of the employment report. It recommended no trading on Good Friday last year.
“We’ve got a big conundrum, which is that bond markets will be open,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said in a telephone interview. “The thin liquidity in the bond markets means that the job report could move the needle.”
Other strategists said the reaction will be muted. The closed equity market means investors will be less willing to take on risk, according to John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York. His firm oversees $209 billion.
“It takes the edges off the bullishness or bearishness,” he said in a phone interview on April 2. “If there was a liquid stock market the day the jobs number came out and I thought we were going to see a positive surprise, I might be a little more long, a little more aggressive than I would be this time.”
When U.S. stock exchanges reopened on the Monday after Good Friday in 2010, the S&P 500 climbed 0.8 percent to 1,187.44, its biggest gain in a month and highest close since September 2008.
The 10-year Treasury yield topped 4 percent for the first time in 10 months. Almost 7.8 billion shares changed hands on April 1, 2010, the day before the stock market closed. Volume slowed to 7.05 billion on April 5 when trading resumed, 18 percent lower than average in the three months leading up to Good Friday.
The jobs report and Good Friday also coincided in 2007, 1999 and 1996, according to data compiled by Bloomberg. After the Labor Department said on April 6, 2007, that employers added 50,000 more jobs than economists projected, S&P 500 futures climbed 0.4 percent and the 10-year Treasury yield jumped to an almost two-month high of 4.75 percent. When trading resumed on April 9, the S&P 500 and Dow reached six-week highs.
Barclays, Goldman Sachs
Tomorrow, Barclays Plc’s “markets businesses will be appropriately covered to support our clients’ needs,” said Erica Chase, a New York-based spokeswoman for the firm. Trading desks at Goldman Sachs Group Inc. “will be adequately staffed, as they always are, to handle trades that our clients want to execute,” said Michael Duvally, a spokesman for the bank.
The unemployment rate held at a three-year low of 8.3 percent last month, according to economists’ projections. Filings for jobless benefits dropped by 6,000 to 357,000 in the week ended March 31, the fewest since April 2008, the U.S. Labor Department said today.
Federal Reserve Chairman Ben S. Bernanke said last month that a further reduction in the employment rate will probably require a quicker expansion of business production and consumer demand, which “can be supported by continued accommodative policies.” The S&P 500 tumbled 1.4 percent in the past two days as minutes from the Fed’s latest policy meeting damped speculation about further monetary stimulus.
“The broader reaction from participants will most likely be seen Monday, when equity markets reopen,” said Ryan Larson, Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc. His firm oversees $250 billion in assets. “From our standpoint, we will certainly be monitoring the data regardless if the U.S. equity market is closed.”
Traders Eye 45-Minute Window After Good Friday Report - Bloomberg