NEWS AND ANALYSIS

Incisive market commentary and expert opinion

Stay ahead with our market commentary and webinars from our in house market strategist

Open a Live AccountOpen a Demo Account
 
+ Show blog menu

Categories

Menu

Expand 2017 <span class='blogcount'>(175)</span>2017 (175)
Collapse 2016 <span class='blogcount'>(483)</span>2016 (483)
Expand December <span class='blogcount'>(23)</span>December (23)
Expand November <span class='blogcount'>(41)</span>November (41)
Expand October <span class='blogcount'>(37)</span>October (37)
Expand September <span class='blogcount'>(41)</span>September (41)
Expand August <span class='blogcount'>(52)</span>August (52)
Expand July <span class='blogcount'>(38)</span>July (38)
Expand June <span class='blogcount'>(42)</span>June (42)
Expand May <span class='blogcount'>(42)</span>May (42)
Expand April <span class='blogcount'>(45)</span>April (45)
Expand March <span class='blogcount'>(41)</span>March (41)
Expand February <span class='blogcount'>(42)</span>February (42)
Collapse January <span class='blogcount'>(39)</span>January (39)
PM Bulletin: Gold
29 Jan 2016
AM Bulletin: BOJ takes rate negative
29 Jan 2016
PM Bulletin: BOJ in focus
28 Jan 2016
AM Bulletin: FOMC disappoints, but earnings offer support
28 Jan 2016
PM Bulletin: Facebook reports after the close
27 Jan 2016
AM Bulletin: Crude still driving equities
27 Jan 2016
PM Bulletin: Tomorrow’s FOMC meeting
26 Jan 2016
AM Bulletin: Equities slide on crude sell-off
26 Jan 2016
PM Bulletin: Silver chart
25 Jan 2016
Weekly Bulletin: Promise of further stimulus halts equity slide
25 Jan 2016
PM Bulletin: EURUSD chart
22 Jan 2016
AM Bulletin: Equities rally on ECB and oil
22 Jan 2016
PM Bulletin: Dovish Draghi triggers euro sell-off
21 Jan 2016
AM Bulletin: ECB meeting in focus
21 Jan 2016
PM Bulletin: Crude makes fresh multi-year lows
20 Jan 2016
AM Bulletin: Stocks slide as oil slumps
20 Jan 2016
PM Bulletin: Bank of Canada rate decision
19 Jan 2016
AM Bulletin: Equities surge on relief rally
19 Jan 2016
PM Bulletin: Crude oil - long-term charts
18 Jan 2016
Weekly Bulletin: China and oil weigh on equities
18 Jan 2016
PM Bulletin: Long-term gold bullion chart
15 Jan 2016
AM Bulletin: More woe from China
15 Jan 2016
Holiday Schedule: Martin Luther King Day Monday 18th January 2016
14 Jan 2016
PM Bulletin: Equities: bull or bear?
14 Jan 2016
AM Bulletin: Investors remain jittery
14 Jan 2016
PM Bulletin: The Bank’s rate decision
13 Jan 2016
AM Bulletin: Oil rebound lifts stocks
13 Jan 2016
PM Bulletin: Saudi Aramco’s IPO
12 Jan 2016
AM Bulletin: Crude closes in on $30
12 Jan 2016
PM Bulletin: US Fourth Quarter Earnings Season
11 Jan 2016
Weekly Bulletin: 2016: Trouble ahead?
11 Jan 2016
January: Non Farm Payrolls Out Today
08 Jan 2016
PM Bulletin: Another blow-out payroll number
08 Jan 2016
AM Bulletin: China effect calms markets
08 Jan 2016
PM Bulletin: Non-Farm Payroll look-ahead
07 Jan 2016
AM Bulletin: Equities slump after 2nd China trading halt
07 Jan 2016
AM Bulletin: Investors remain jittery
06 Jan 2016
AM Bulletin: China steadies and Europe rallies
05 Jan 2016
AM Bulletin: Chinese equities plunge
04 Jan 2016
 
 
 Thursday 07 January 2016

PM Bulletin: Non-Farm Payroll look-ahead

 

 

This Friday’s Non-Farm Payroll number will be the most significant US data release since the Fed hiked rates back in mid-December. Granted, we’ve had the final revision to third quarter GDP which, at +2.0% annualised, was a touch better than expected. We’ve also seen a strong Consumer Confidence number, although confidence can evaporate quickly when stock markets are plunging. But the latest update for US manufacturing was disappointing. Earlier this week the ISM Manufacturing PMI came in at 48.2, well below the 49.1 reading expected, and once again indicating contraction in this sector. It is worth noting that US manufacturing (as measured by this data series) has been declining for over a year now. Even more worrying is the fact that Manufacturing PMIs from China are also contracting while those across the euro zone and UK are relatively flat.

Overall, global manufacturing is hardly robust, and yesterday’s US Non-Manufacturing (Services) did nothing to dispel the gloom. This came in at 55.3 for December which was lower than expected as well as being down from November’s 55.9 reading.

But the real issue is if the US Federal Reserve did the right thing in tightening monetary policy at the end of last year. On one hand it could be argued that the Fed’s hike was long overdue, if only to provide itself with some ballast to cut when the next crisis hits. But the other side of the argument says that they left it too late and will be forced to reverse their rate rise in a matter of months, damaging their already fragile credibility. It is worth noting that the Fed has never raised rates with the ISM Manufacturing PMI below 50 as it has been now for two months.

It is somewhat ironic that the FOMC held back from tightening in September due in no small part to the ructions in China’s stock market and the subsequent yuan devaluation. Now we’ve got another “China Crisis” straight after a 0.25% hike, with the Fed projecting a further 1% of increases over the course of 2016.

One thing which would help vindicate the Fed’s decision to tighten, and also help to steady equity markets, would be a strong payroll number tomorrow. The consensus expectation is for an increase of 202,000 jobs in December – slightly below November’s 211,000 and well down on October’s stunning 271,000 blow-out number. Nevertheless, anything above 200k would suit most investors just fine, and may even help to settle nerves after a somewhat torrid start to New Year’s trading. But as always, the big caveat is the possibility of significant downward revisions to prior releases, so traders should make sure they look behind the headline number. If we do see downside revisions, or if December’s number comes in much lower than expected (say, 180,000 or thereabouts) then we should expect a sudden about-turn in the US dollar. The greenback has risen against the euro and British pound recently and a poor number could catch dollar bulls offside and leave them desperate to cover. Similarly, a weak payroll release is likely to lead to further losses for the USDJPY and equity markets in general. 

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: Bulletin PM NFP

Category: PM Bulletin


Add a comment Add comment            

 

 
© 2017 Spread Co Limited. All Rights Reserved.

Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

Spread betting and CFD trading are leveraged products and can result in losses that exceed your deposits. Ensure you understand the risks.

Losses can exceed deposits. Click here to learn more.