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In typical non-farm payrolls fashion, the devil was in the detail. The headline number may have missed expectations – and the downward revision to the previous months didn’t help – but the drop in unemployment and the rise in average hourly earnings made it a positive report.
It took a while to sink in, but equity markets sold off as a result of the numbers. The moderately positive jobs report was enough to push stocks into the red as the downward move of this week continues. The bounce-back of the stock market between late January and early February appears to have run its course. While the US 500 is south of 1900, and Wall Street is under 16,300, the outlook for US equity markets will be negative.
The dollar was the biggest benefactor of the report as it suggests rate hikes from the Federal Reserve this year can’t be ruled out. The set of numbers were not so good that a rate hike in the US this year is a certainty, but it might make the Fed adopt less dovish language. GBP/USD and EUR/USD handed back some of the gains they made during the week.
Gold was one of the biggest casualties from the US jobs report but pullback was relatively small compared with the upward trend that has been in place since mid-January. The dollar may not be as soft as it was earlier this week, but the uncertain global economic outlook will keep demand for gold high. While the metal holds above $1145 a retesting of today’s high is a possible, but if $1145 is taken out it would suggest the bears are in control.
To a lesser extent oil has been knocked back by the jump in the dollar. It’s still choppy trading for oil – Brent and WTI – and both markets have been edging lower since yesterday’s high. Providing support for Brent is $34, but $36 still seems out of reach. While WTI remains above $32 a move towards $34 is possible.