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Modest gains for stocks on mixed US jobs report

Stock markets are set to close a little higher following the mixed US non-farm payrolls report. 

The headline reading caught many by surprise as 140,000 jobs were lost last month, while the consensus estimate was 77,000. Initially, traders were spooked because it was the first negative reading in eight months. As the full details of the report were digested, it became apparent that things were not as bad as first seemed. November’s reading was revised up from 245,000 to 336,000. Average wages on a yearly basis jumped from 4.4% to 5.1%. The unemployment reading for December remained at 6.7%, narrowly undershooting the 6.8% forecast. Not only did the jobless rate hold steady, but so did the participation rate – at 61.5%. That suggests that job seekers confidence in the labour market is holding up. In recent sessions there has been a lot of chatter that the future Biden administration will provide extra stimulus to the economy. The mixed nature of the jobs report hasn’t stoked up calls for extra stimulus but at the same time, the poor top-line number suggests the economic rebound is running out of steam and needs assistance.             

Marks and Spencer shares are in the red on the back of its downbeat third quarter performance. Total UK like-for-like (LFL) sales dropped by 7.6%. As per usual with M&S, the food division outperformed while the home and clothing department dragged on the group. Food LFL sales increased by 2.6%, while the clothing and home unit saw sales slump by over 25%. The lockdowns were blamed for the awful update as in-stores sales tumbled by 46.5%. On the other side of the coin, online sales jumped by over 47% so that helped soften the blow of the brutal high street sales. It is very clear the gulf between the food business and the clothing and home unit is widening. Management confirmed that changes are still being made to rectify that but patience is running thin. To make matters worse, the group cautioned that trading in the near-term will remain very challenging.

Barratt Developments shares’ are up 4% as the house builder upped its guidance. It also said it was looking to resume its dividend next month. The forward sales metric is up over 19% at £3.2 billion as demand in the housing market has been robust since it reopened.

ASOS will announce its first quarter numbers next week. Traders have high hopes because online retailers have outperformed amid the pandemic, often at the expense of traditional high street rivals who suffered on account of the lockdowns. The e-commerce fashion firm announced today it will invest £90 million in a new UK warehouse, creating 2,000 jobs over the next three years. This sends out a very positive message about its outlook.  

US

Modest gains have been notched up on what has been a stellar week for US equities. Now that the dust has settled with respect to the US jobs report, there is a feeling that the update probably won’t have much of an impact on Joe Biden’s plans for when he takes office later this month. The jobs update will probably fade from traders’ memories as the weekend draws near and stimulus speculation will probably be at the centre of attention again next week.      

Tesla shares continue to be on a roll as yet another all-time high has been set. Its market capitalisation has now topped $800 billion.

Sarepta Therapeutics shares have come under huge pressure after it announced that its treatment for duchenne muscular dystrophy failed to meet the main goal of the trial. The stock is - 50%.

Boeing shares are only down 0.7% following last night’s news that it has been fined $2.5 billion by the Department of Justice in relation to the 737 Max crashes. The aircraft manufacturer was charged with criminal conspiracy because of the disasters. The share price has held up remarkably considering the reputational damage it has endured.         

FX

The US dollar index is up for the third day in a row following a very bearish run which saw it drop to a 33 month low on Wednesday. Not surprisingly, volatility jumped when the US jobs update was released but the greenback has been gaining ground and it is now above the pre-announcement level. In the past 48 hours we have seen a poor ADP employment reading as well as a mixed jobs report but that hasn’t stopped the dollar from moving higher, so that underlines the bullish sentiment. EUR/USD is in the red on account of the dollar’s move.

USD/CAD is largely flat on the day as Canada posted its jobs report too. The Canadian update was disappointing as the unemployment rate ticked up to 8.6%, from 8.5%, meeting forecasts. In addition to that, the employment change reading was -62,600, essentially wiping out November’s 62,100. Firmer oil prices have helped the Canadian dollar. 

Commodities

Gold is enduring a loss of more than 2.5%, which is big for the commodity. It has fallen to its lowest level in over two weeks. The positive move in the dollar is hurting gold but the bearish move seems relatively large when you consider the dollar is only up 0.1%. Platinum and palladium are nursing large losses too.

Oil’s bullish run continues as supply concerns circulate. The sharp decline in US oil stockpiles that were posted on Wednesday points to robust demand, which is supporting WTI and Brent crude oil too.


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