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Hedge in May and Go Away

• A sharp rise in market rates drove down equity prices in April. The correlated move was consistent with our suggestion before Easter to hedge the downside with equity options.
• We now believe the front end is broadly flat enough, so we have turned neutral on rates relative to the market despite being more hawkish than the consensus on the BoE.
• The potential for market expectations to overshoot again, extending the bearish trends, means hedging with options may still appeal over selling or hoping for recovery.

By Philip Rush

New Zealand Unemployment Rate 4.3% (consensus 4.2%) in Q1-24

- New Zealand's unemployment rate increased surprisingly far in Q1-24 to 4.3%, surpassing the one-year average by 0.35 percentage points and the long-run average by 0.70 percentage points.
- Employment contracted by 0.2% quarter-on-quarter, but labour costs rose by 0.8% q-o-q and 3.8% y-o-y.

Japan Unemployment Rate 2.6% (consensus 2.5%) in Mar-24

- Japan's unemployment rate for March 2024 remained at 2.6%, slightly higher than consensus estimates, indicating a surprisingly stable labour market.
- The Jobs to Applications Ratio for the same month increased to 1.28, strengthening the already favourable environment for job seekers amid more job openings than applicants.

Norway Unemployment Rate 4.0% in Mar-24

- Norway's unemployment rate rebounded to 4.0% in March 2024, the highest level since January 2024's spike.
- This rate is 0.35 percentage points above the one-year average and 0.53 percentage points above the long-run average, suggesting a cyclical slackening of Norway's labour market.