US jobs report lifts mood

US jobs report lifts mood

Stock markets in Europe are higher heading into the close on the back of the broadly positive US non-farm payrolls report. 

This week fears grew for the state of the global economy as disappointing services and manufacturing data from Europe plus the US spooked traders, which prompted heavy losses on global stock markets. Today’s largely upbeat US jobs report was a welcome change, which encouraged bargain hunting. Some of the fear that dominated the markets has evaporated as the wheels are not coming off the US economy. Recently we have heard that Chinese companies have been buying up US agricultural goods, so that should help with the US-China trade talks that are due to take place next week.

Overall it was a pretty good US jobs report. Last month, 136,000 non-farm payrolls jobs were added, which undershot the 145,000 forecast. The August report was revised higher to 168,000, from 130,000. The unemployment rate fell to from 3.7% to 3.5%, a 50-year low. Average earnings have been typically strong, but they cooled to 2.9% from 3.2%. Overall it was a positive report which should temper expectations about the Federal Reserve cutting rates later this month. This week’s awful ISM manufacturing report and disappointing ISM non-manufacturing reading shouldn’t be forgotten, but the Fed might not might be too keen to cut rates, with the low unemployment rate.            

Bob Dudley, the CEO of BP, will step down next year. Mr Dudley was drafted in to steady the ship in the wake of the Deepwater Horizon disaster. The company suffered enormous reputational as well financial damage on the back of the accident. Mr Dudley oversaw the major restructuring at the oil titan in a bid to slim down as well as a beef up its cash. BP is still subject to the volatility of the underlying oil market, but it is in far better shape now then it was when Mr Dudley began the top job. Bernard Looney, the group’s head of exploration, will take over from Bob Dudley. Traders reacted well to the news as it wasn’t exactly a shock. 

It was reported the European Commission will give approximately £1 billion to UK power companies relating to the cost of extra generation in relation to outages. Scottish Southern Energy shares are higher, while DRAX shares have rallied in excess of 10%.                           

Meggitt were awarded a $48 million contract with the US military. The agreement will entail supplying aerial weapons scoring systems, which will cover installation, product development as well as maintenance. Workspace confirmed it plans to sell-off a property in London for £14.75 million. The sale of the asset in Farringdon will equate to a 47.5% premium on the valuation that was listed in March.                       

HP Inc shares have fallen today after the company revealed a restructuring plan last night. The group plans to cut 7,000-9,000 jobs, which equates to approximately 16% of the global workforce. The changes will cost the business roughly $1 billion, but the firm expects to generate at least $3 billion worth of cash free cash flow by 2020, so the transition should be worth it in the medium-term. HP upped its guidance too as the EPS outlook is now $2.22-$2.32, which was an improvement from the previous guidance of between $2.18 and $2.22.    

There was a spike in volatility in the wake of the US jobs report, and the US dollar index jolted higher, but now has it has given back some of those gains. The announcement was mostly positive, but some traders might be concerned about the slide in US wages. The greenback has broadly been pushing higher since mid-September, and if it holds above yesterday’s lows the positive trend should continue. Brexit woes appear to be doing the rounds as GBP/USD is lower, while EUR/USD is higher on the session.  

Gold is a little lower this afternoon as traders are less fearful about the health of the US economy, hence why the metal has slipped. Gold benefitted greatly during the week from the slump in stocks as dealers poured money into assets that are deemed to be lower risk, such as gold, and now it has turned lower.

Oil, like stocks has pushed higher today as US jobs data helped move the tone along from a cautious one, to a more upbeat one. It was been a dreadful few weeks for oil as the return of the Saudi oil production to pre-attack levels, combined concerns about demand levels in light of disappointing manufacturing data. Bargain hunters have entered the fold an account of the US jobs data, but the wider demand woes won’t disappear easily.        


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