Wake Up Call - Employment in Focus

Major U.S. equity indices are indicating a modestly higher open. Remember, today is the last day of the trading week, and in this type of volatile environment and considering recent gains, we would normally anticipate capital to seek a safer home over the three day weekend. However, Iran's release of the 15 sailors lifted much of that concern, and expectations for tomorrow's jobs report are relatively positive, so the market might hold steady or even move modestly higher today, especially if oil weakens as we anticipate. Even so, we have concerns about Monday's open, as we are not so sure the employment report for March will be as pleasant as expected. Remember, however, that the Fed is counting on weakening employment to ease pressure on inflation, a positive for stocks. Still, we believe food and energy driven inflation will persist. See the details of our discussion below.

Asia:
Hang Seng Index +1.03%; NIKKEI 225 -0.3%

U.K., Europe & Middle East:
FTSE 100 +0.25%; CAC 40 -0.04%; DAX +0.18%


Key Headlines:

• *** U.S. initial jobless claims for the week ended March 31 exceeded expectations. New jobless claims measured 321,000, versus Bloomberg consensus expectations for a total of 315,000. Claims were up 11,000 from the prior week. Employment is in focus ahead of tomorrow's March Nonfarm Payrolls Report. We will discuss this more in "Today's Morning Coffee," which is on tap.
• *** As the freed 15 British sailors return home, oil prices have not reacted as would be expected, yet. Oil prices are being held steady by offsetting factors. Yesterday's oil and distillates inventory report showed a draw on gasoline in storage, and emphasized the tightness of the supply/demand dynamics of the commodity due to limited refining capacity. The problem is partly related to refinery outages, but may also have something to do with the warming climate and an earlier start to the driving season. You heard that here first. With stockpiles in the lower half of their historic range so early in the driving season, and with a busy hurricane season forecast, some are speculating on gas prices reminiscent of two years ago. However, there is a serious flaw in the argument for keeping oil prices inflated. Oil stockpiles increased, so the gasoline draw was more likely driven by a supply bottleneck rather than a crude shortage. Oil should be moving lower, while gasoline rises, in our view.
• *** High flying Chinese shares may soon come under pressure again, as Chinese bank regulators announced intentions to once again raise the bank reserve requirement another 0.5%, to 10.5% of deposits.
• *** General Motors (GM) reported expectations for a weaker second quarter than it previously expected, based on overall industry weakness. This may be an early sign of the consumer weakness we are forecasting.
  
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