Asian markets are mostly, modestly in the green while European ones are trading lower this morning after the stellar gains of last week; US contracts are mixed to positive. The DAX is underperforming as German industrial production took a record hit of 17.9% in April, exceeding economist estimates, as the lockdown measures saw unprecedented closures of factories and shops.

The main news that pushed the markets significantly higher on Friday was the US nonfarm payrolls report which shower a record 2.5mn increase in jobs last month versus 7.5mn expected. The better than expected results may imply that other economic data like industrial output, retail sales and other economic data may also improve in tandem from April readings. The solid data of Friday also reignites the steepness of the recovery debate with V or swoosh shapes now looking more likely than L-shaped. An interesting piece on why a W-shape recovery now looks less likely reflected that a reoccurrence of lockdown measures in a second wave scenario will look to be avoided as governments need to juggle with economic vs. human pain. Moreover, as medication to treat COVID-19 improves, the recovery rate of infections shortens which increases # of patients that hospitals can capacitate.

Although last week marked some noise around the upcoming OPEC+ meeting which was due last Thursday but was postponed to this weekend, the negotiations finalized as the output cuts were extended by another month and the non-compliant nations agreed to also abide. In effect oil trades above 40$ today with some analysts seeing the next target at 50$ if the COVID-19 economic recovery continues its current trend.

What caught the markets attention last week was how fast treasury yields spiked on the market’s risk on appetite, the increasing supply of treasuries across all tenors to fund the widening fiscal deficit and the US Fed’s narrowing of asset purchases week by week. Eyes are set on this week’s FOMC meeting to grasp the rhetoric of the US Fed as to where the policy is going. Some analysts see a need to control rising yields with the increasing debt burden that the US government undertook to fight the crisis. Morgan Stanley however, added a bet on the increasing spread between 3 and 10-year yields after the unexpected surge in US payrolls Friday. The bank does not anticipate the Fed to adopt yield-curve control or some other form of explicit forward guidance at Wednesday’s meeting and that they will shift to a monthly QE target of 80$ billion.