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EURUSD breaks above resistance - PM Bulletin
31 Jan 2017
Equities recover after Monday’s sell-off - AM Briefing
31 Jan 2017
Trending markets and Andrews’ Pitchfork -Trading Guide
30 Jan 2017
Investors rattled by Trump’s curbs - AM Briefing
30 Jan 2017
Dow holds above 20,000 as dollar firms - AM Briefing
27 Jan 2017
Dow breaks above 20,000 - Video Update
26 Jan 2017
Dow at 20,000 boosts risk appetite - AM Briefing
26 Jan 2017
Dow finally breaks 20,000 - PM Bulletin
25 Jan 2017
Wall Street leads stocks higher - AM Briefing
25 Jan 2017
Consolidation continues - Video Update
24 Jan 2017
Dollar recovery helps lift sentiment - AM Briefing
24 Jan 2017
Money management and stop-losses -Trading Guide
23 Jan 2017
Stocks fall on US protectionism fears - AM Briefing
23 Jan 2017
Trump inauguration in focus - AM Briefing
20 Jan 2017
A look-ahead to Trump’s inauguration - Video Update
19 Jan 2017
ECB President Draghi’s press conference in focus - AM Briefing
19 Jan 2017
Dollar steadies after sell-off - Video Update
18 Jan 2017
Equities drift in featureless trade - AM Briefing
18 Jan 2017
Dollar pull-back lifts precious metals- PM Bulletin
17 Jan 2017
Dollar slumps in early trade - AM Briefing
17 Jan 2017
Charting analysis for beginners - Trading Guide
16 Jan 2017
Sterling slumps on “Hard Brexit” concerns - AM Briefing
16 Jan 2017
Earnings in focus - AM Briefing
13 Jan 2017
Fourth quarter earnings in focus - Video Update
12 Jan 2017
Market Info Update: Martin Luther King Day Monday 16th January 2017
12 Jan 2017
Dollar lower as Trump skips stimulus talk - AM Briefing
12 Jan 2017
Trump news conference - Video Update
11 Jan 2017
Trump press conference in focus - AM Briefing
11 Jan 2017
Has gold turned a corner? - PM Bulletin
10 Jan 2017
Another mixed start for Europe - AM Briefing
10 Jan 2017
Trading Psychology - Trading Guides
09 Jan 2017
Sterling slips on "Hard Brexit" fears - AM Briefing
09 Jan 2017
Non-Farm Payrolls in focus - AM Briefing
06 Jan 2017
Non-Farm Payroll look-ahead - Video Update
05 Jan 2017
FOMC minutes viewed as hawkish - AM Briefing
05 Jan 2017
Look-ahead to release of FOMC minutes - Video Update
04 Jan 2017
FOMC minutes in focus - AM Briefing
04 Jan 2017
Strong start to 2017 - PM Bulletin
03 Jan 2017
Equities push higher in first session of 2017 - AM Briefing
03 Jan 2017
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 Friday 06 January 2017

Non-Farm Payrolls in focus - AM Briefing

 

 

Early moves

Another mixed open for European equities

Investors hold fire ahead of Non-Farm Payrolls

It’s been a quiet open for the major European stock indices. This follows on from a mixed close on Wall Street which saw the Dow and S&P drift lower and the NASDAQ Composite post a fresh record high. Market participants appear to be hanging back ahead of the release of the first Non-Farm Payroll update of 2017. This will also be the first report since last month when the US Federal Reserve raised its key fed funds rate for only the second time in 10 years.

The consensus expectation is for a payroll increase of 175,000 in December, just a touch below the 178,000 recorded in November. Anything around here (taking into account the usual caveats about revisions to prior releases) should be market-neutral and would keep the 6-month average just below 180,000 mark.

As far as investors are concerned, anything above 150,000 is broadly positive - even if it glosses over the fact that job gains over the last few years have mainly been low wage and low skilled while job losses have come from higher paying sectors, such as the shale oil industry.

In Wednesday’s release of the FOMC minutes from the December Fed meeting, the US employment numbers were brought into focus. Members of the FOMC noted the risk of an undershooting in unemployment relative to its longer-run sustainable rate. This raises the concern that the Fed may need to tighten more aggressively than currently anticipated to limit undershoot and stem building inflationary pressures. Bear in mind that November’s Unemployment Rate came in at 4.6% - the lowest reading since September 2007, and this is without any of the fiscal stimulus promised by Trump.

Stock Index Update

European equities little-changed

UK housebuilder Persimmon soars

European stock indices ended little-changed yesterday despite a sharp sell-off on Wall Street. The major US indices have failed to make much headway since the middle of December, following a stunning rally in the aftermath of Donald Trump’s surprise election victory. The Dow Jones Industrial Average has repeatedly failed to break above the psychologically significant 20,000 mark and some investors have begun to worry that the Trump rally has been based on little but a succession of campaign promises. There’s no doubt that his proposals to cut taxes, slash regulations and embark on extensive infrastructure spending projects would boost economic growth. However, there is also a concern that interest rates would need to rise faster than currently anticipated to fend off inflationary effects.

The UK’s largest housebuilder by market capitalisation ended yesterday sharply higher. Persimmon (PSN) soared after reporting full-year revenues of £3.14 billion - up 8% on the year before. The company said house sales were up by 599 (or 4%) over the same period. This was particularly good news for shares in UK housebuilders which slumped in the aftermath of the June referendum on EU membership. Persimmon ended the day 5.8% higher at 1,915.15 pence.

Commodities Update

WTI and Brent fall on inventory data

Gold and silver build on gains

Crude oil was steadier again yesterday in early trade. However, both WTI and Brent fell sharply following the latest US crude oil inventory release. The headline number from the Energy Information Administration (EIA) showed a drawdown of 7.1 million barrels of crude for the week ending 30th December. This was far above the 1.8 million barrel drawdown expected, and should, on the face of it, have led to a sharp rally in oil. However, there were big increases in gasoline and distillate inventories along with total commercial petroleum. The EIA report backs up data from the American Petroleum Institute (API), released after Wednesday’s close. This also showed a much bigger-than-expected drawdown in crude inventories, but very significant builds in gasoline and distillates.

Intermediate support for WTI and Brent comes in around $52 and $54 respectively. The area around $60 provides resistance. This is considered a key psychological level as far as traders are concerned as many US shale oil producers can make good profits with oil at this price. This suggests that US output should pick up and go a long way to counteracting OPEC and non-OPEC production cuts.

Gold and silver flew higher yesterday boosted by the pull-back in the US dollar. The sell-off in the greenback came despite the release on Wednesday of minutes from the Fed’s FOMC meeting in December. This was when the committee decided to hike rates for only the second time in ten years. The minutes were considered to be hawkish overall as the FOMC expressed uncertainty about the US economic outlook but felt that future fiscal stimulus could raise the risk of a further undershooting of unemployment relative to its longer-run sustainable rate. But the US dollar was unable to build on gains from earlier in the week. This was due to intervention from the People’s Bank of China (PBOC) to halt the slide in the yuan. The PBOC’s moves led to a sharp rally in the yuan and a corresponding slump in the dollar. This unnerved investors who rushed to push funds into precious metals for safety.

Forex Update

Dollar slips again

Investors spooked by rally in Chinese yuan

Yesterday the US dollar fell again against all the majors. Its biggest decline came against the Japanese yen as the USDJPY dropped below 116.00 for the first time since mid-December. But it also clocked up significant losses against the euro, British pound, Canadian dollar and Swiss franc. The sell-off in the greenback looked to be a continuation of the profit-taking we’ve seen since Tuesday. This was when the Dollar Index hit a 14-year high. The trigger for the pull-back appears to have been moves by China to halt the decline in the yuan. The currency has fallen relentlessly against the US dollar since April last year in a move exacerbated by capital outflows. Yesterday the People’s Bank of China took drastic measures to drive yuan short-sellers out of the market. It did this by pushing the overnight offshore yuan deposit rate up to 80% - its highest level ever.

The rally in the yuan emboldened those traders looking to short the US dollar. The question now is whether this is a brief correction or the start of a more protracted downside move for the greenback.

Upcoming events

Today’s significant economic data releases and events include German Factory Orders, German Retail Sales and Euro zone Retail Sales. From the US we have Non-Farm Payrolls, the Unemployment Rate and Average Hourly Earnings.

Disclaimer:

Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Tagged: AM Bulletin

Category: AM Bulletin


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