James Brodie
Head of Learning & Development, Flux
Stronger US Payroll, Brent Poses Risk to Bonds, AI Casualties
Strong US payrolls lift yields, boost stocks; CPI key next; UK GDP weak; AI hits property stocks; 0DTE surge; rare earth futures
Much stronger US payrolls data saw yields jump (2-year up +6bp) as the survey showed 130k new payrolls, well above 65k consensus (higher than 78/80 economists in Bloomberg’s survey predicted), with the unemployment rate unexpectedly falling to 4.3%.
This was the strongest number since April 2025 and included a drop of -34k in government jobs. Forget the discussion about seasonal adjustments and revisions, it beat expectations, yields rose, equities rallied on the goldilocks scenario (CPI data Friday).
Beware Fridays CPI data. Critical for equities, lower CPI endorses the Goldilocks rally (strong growth, low inflation) while a higher number would force the rethink on expected Fed cuts, challenging for equities. While NFIB National Federation of Small Businesses are planning price increases and core import prices just accelerated to the highest rate in a year, the Trueflation data suggests a lower CPI. (Chart 1, Steno Research, Bloomberg and MacroBond). Again, let the price action play out. 2-year yields currently at 3.51%, critical levels for a breakout are 3.63% to the upside, 3.40% to the downside. Stop levels will be triggered here.
The rally in Brent above $70 also poses a risk bonds, yields higher (Chart 2, Brent vs 2-yr US bond yield, Bloomberg)
UK GDP per head fell in two successive quarters, both by 0.1%. Five quarters of post-Election data for the UK - both GDP and GDP per capita tracking below the average of the preceding 14 years. The construction sector was especially weak, led by housebuilding.
More South Korean correlations. BofA: South Korean exports imply big global earnings upside (Chart 3, BofA Global Research, LSEG Data & Analytics, Bloomberg)
Separately, more equity casualties from AI. First business software, then tax planning and wealth management. Now real estate services. Companies in this latest sector saw their stocks sink yesterday as investors decided they’re next on the AI hit parade as a new crop of applications and tools threatens to disrupt several industries.
Shares of CBRE Group and Jones Lang LaSalle plunged 12% and Cushman & Wakefield dropped 14%. For CBRE and Cushman & Wakefield, the moves marked the biggest drop since the Covid-driven collapse of 2020.
U.S. House votes to overturn Trump’s tariffs on Canada.
Zero days to expiry options volumes in US equities surge. 0DTE options now reflect a record ~78% of all daily Nasdaq 100 options volume, up +23 points since 2024. For the S&P 500, 0DTE represents ~65% of daily options volume, up from ~50% in January 2024.
CME EXPLORING LAUNCH OF FIRST-EVER RARE EARTH FUTURES CONTRACT, SOURCES SAY
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