The Dow Jones, S&P 500 and NASDAQ 100 are all higher on the day with traders content over the latest US non-farm payrolls report.

The US added 228,000 new jobs to the payrolls in November, against an expected reading of 200,000. As always with US jobs report, the headline figure only tells us one part of the puzzle, as the October reading was revised lower to 244,000, from 261,000.

The unemployment rate held steady at 4.1% - meeting estimates. On a month-on-basis, average earnings grew by 0.2%, while traders were expecting 0.3%, and the October figure was revised to -0.1% from 0.0%. On an annual basis, average earnings rose by 2.5%, which was an increase on the previous reading of 2.3%, but missed the 2.7% forecast.

It is encouraging to see the US is still creating a solid amount of jobs per month, but the wage figures are still underwhelming. Job creation growth has been outstripping earnings growth for some time now, and the latter will need to pick up in order keep the US economy moving.

Europe

The U-turn in the pound has pushed the FTSE 100 higher and it has now exceeded its eurozone equivalents.

At the start of the session, sterling was gaining ground on the back of the announcement that the UK and the EU had made sufficient progress in the first phase talks, so it can now move onto the discussions about trade. The early positive momentum in sterling, ran out of steam and it then the pound turned negative – which propped up the FTSE 100.

The DAX hit its highest level in nearly one month after Martin Schulz of Social Democratic Party (SPD) stated he is open to the idea of starting talks with the Christian Democratic Party (CDU) about forming a coalition. The CDU is headed by Angela Merkel, who has been the steady hand of German and European politics for the past decade. The prospect of Germany have a functioning government again is lifting investor sentiment in the country.

The US [payrolls report was initially well received in Europe, but the bullish sentiment has started to fade.

Berkeley Group shares posted a new all-time high today after the homebuilder revealed an 8.1% increase in first-half revenue and a 36% rise in pre-tax profit. The construction company previously had a forecast to notch up £3 billion in the five years between 2016 and 2021, and now they aim to make £3.3 billion in that time period. The bullish sentiment surrounding the stock is showing no signs of slowing.   

FX

GBP/USD tumbled throughout the afternoon after the early morning buying frenzy fizzled. Sterling got off to a strong start in the early hour due to the news that the UK and EU will move onto next round of talks in relation to Brexit. Traders a feeling in was going to be good news that was reported this morning so some of the move was already priced in. The US has been fairly firm throughout the day so this move we are seeing is more to do with a slide in sterling, rather than buying of the US dollar.

EUR/USD managed to push higher after the US jobs data was reported, but is still lower on the session. The euro had a muted reaction to the comments from Martin Schulz of the SDP. The softer than anticipated average earnings in the US helped the single currency recoup some earlier losses. 

Commodities

Gold is fractionally higher on the day as the metal bounced back from yesterday’s severe sell-off – where it fell to a four month low. Gold experienced a lot of volatility when the US non-farm payrolls were revealed, but it is now back to the levels it was at pre-announcement. Gold traders will be treading lightly ahead of next week’s Federal Reserve meeting where interest rates are tipped to be hiked.

WTI and Brent Crude oil are rallying today as strong demand from China is driving the buying pressure. The second-largest economy in the world saw the rate of imports rise in November, and it topped analysts’ expectations.

According to Jefferies, global demand for oil will pick up in 2018 and the bank foresees a 10% increase in demand from China.

There are also supply concerns, as oil workers in Nigeria are threatening to strike. 


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