Oil Rallies On Production Cut; U.S. Reveal Mediocre Jobs Report

Europe

European equity markets are set to finish higher today, but they are off the highs of the session. Volatility is high and investors are twitchy. It was been a dreadful week for European markets, and today’s positive move can’t mask the previous losses.

Berkeley Group (LON:BKGH) shares are higher today after the company posted a fall in profit, but they maintained their medium-term outlook and that caught trader’s attention. For the six month period, pre-tax earnings dropped by 25.7% to £401.2 million. The London and South East focused house builder blamed the political uncertainty surrounding Brexit for the dip in profit. The firm confirmed that costs are steady at approximately 4% per year, but that figure might vary depending on what sort of Brexit is agreed. The group kept its two-year outlook unchanged, and that has lifted investor confidence, as it shows the group is only nervous about the Brexit related uncertainty. The stock has been moving lower since June, and if the bearish trend continues it might target 3,170p.

Associated British Foods (LON:ABF) shares are in the red after the company said that trading at Primark was ‘challenging’. Retailers have had a tough 2018, but Primark has fared better than most so the cautious update is worrying. The group confirmed that like-for-like sales in September and October were ‘just positive’, while negative in November. The company said that profit at the sugar division will be ‘significantly lower’ due to weakness in the EU sugar prices.

Tesco (LON:TSCO) received a boost from BNP Paribas (PA:BNPP) who upped their outlook for the stock to neutral from underperform.

IP Group (LON:IPO) shares are in the red after Jefferies downgraded the stock to underperform from hold, and the bank trimmed the price target to 95p from 119p.

US

Markets have had a volatile few days and today is no different. The Major US indices rallied on the open, but turned lower yet again. The sharp move on Wall Street is partially driven by conflicting announcements from Washington DC. Larry Kudlow, director of the US national economic council, claimed the Federal Reserve responds to data, not President Trump. Mr Kudlow also said the US might extend the 90-day truce with China if talks don’t go well. On the other hand, Peter Navarro ,advisor to Trump ,claims the US will press ahead with new tariffs if a deal hasn’t been reached after the 90 day period.

The non-farm payrolls report was mediocre. In November, 155,000 jobs were added, which was well below the 200,000 that economists were expecting. The October report was revised down to 237,000 from 250,000. The jobless rate remained unchanged at 3.7% - meeting forecasts. On a monthly basis, average earnings was 0.2%, but traders were expecting 0.3%, and the October reading was revised down to 0.1% from 0.2% The yearly average earnings reading held steady at 3.1%.

There were positive aspects to the report, but the negatives made traders less fearful about potential rate hikes from the Federal Reserve. The markets are still pricing in a rate hike for this month, but beyond that, traders are well certain.

FX

The US dollar index is lower in the wake of the US jobs report. Going into the update, traders felt the Fed were a little less hawkish that they had originally thought, and today's number add weight to the argument that the Fed will take a softer stance next year.

EUR/USD has been lifted by the softer greenback. The revised third-quarter GDP report showed that the region grew by 1.6%, which missed the forecast of 1.7%. The region has been producing underwhelming economic updates recently, and it is further proof the currency bloc is slowing down. The Italian budget is hanging over the currency too.

GBP/USD is in the red as the poor UK housing data has weighed on the currency. According to Halifax, UK average house prices dropped by 1.4% in November on a month-on-month basis. The report is further proof that the British housing marked is weakening.

USD/CAD sold-off heavily due to the so-so US jobs report, and at the same time the impressive Canadian jobs data added to the move. The Canadian jobless rate fell from 5.8% to 5.6%. The employment change jumped by 94,100, which easily topped the consensus estimate of 11,000. The vast majority of the new jobs created were full-time positions too, which underlined the robust report.

Commodities

Gold has been given a lift by the dip in the US dollar. In recent months the metal has enjoyed a strong inverse relationship with the greenback and today the commodity reached a fresh five month high. If the bullish move continues it might target the $1,265 region.

Oil rallied after it was reported that OPEC and non-OPEC members are to cut production by 1.2 million barrels per day. Well in advance of the two-day meeting, there was speculation an output cut of 1.4 million barrels would be announced , but earlier this week there was chatter of a 1 million barrel cut ,and that is why the market rallied.

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Written By: CMC Markets