World markets have been mixed overnight on a combination of technical exhaustion and traders waiting for employment reports in North America today and voting results in Europe (Italy referendum and Austria President) this weekend.
US index futures are down with the NASDAQ still getting hit harder falling 0.5% relative to the 0.2% drop in Dow futures. The FTSE and the Dax are both down 0.9% while Italy’s FTSEMIB is down only 0.7% indicating bigger declines earlier this week may have already priced in a No win and the potential resignation of PM Renzi.
Crude oil has paused to consolidate two days of big gains with WTI levelling off in the $50.00 to $51.50 range near the top of the trading range that has dominated since the summer. RUB is having a correction while CAD and NOK are holding steady. Gold, meanwhile, appears to be finding support near $1,170. GBP is climbing again today on speculation the UK government may pursue a soft Brexit after following yesterday’s openness to paying money to the EU for continued market access with overnight comments suggesting an openness to migration to fill low skilled jobs where it suits the national interest while ending free movement in other areas.
Today’s spotlight is squarely on the US nonfarm payrolls and Canada employment reports due Friday morning. ADP payrolls beat the street coming in well above 200K for November while October was revised down closer to 120K. This indicates a slowdown in hiring in October before the election and a rebound after the election in November. I suspect we will see the same trend in nonfarm payrolls. The street is expecting 180K, I am thinking 220K and a 40K downward revision to last month.
I don't think there will be any change to expectations for a December rate hike unless we had a huge negative surprise like a negative number. The report could still have an influence on how many rate hikes traders are expecting for 2017. In recent weeks the US Dollar rally has gone from pricing in two increases next year to four or five so the dollar could be active on the employment news. Any signs of softness could spark a US Dollar correction. Traders may recall that last year the US Dollar peaked in early December ahead of the Fed’s last rate increase. The change in manufacturing jobs may attract more attention than usual with President-Elect Trump focusing on saving or bringing back blue collar jobs.
Canada’s employment figures could influence trading in the Loonie today. After lagging initially, CAD has started to respond to the positive oil market action and strong Canadian GDP reports. Traders now look to the job figures for signs that the strong Q3 momentum has continued into Q4. I think that for the second month in a row the street is being way too pessimistic about Canada. The consensus estimate is (15K). I think we could see a 20K increase and a rebound in full time positions. Job creation could play a key role in indicating whether the Bank of Canada is still under pressure to cut interest rates next week or not.
There have been no major corporate announcement this morning.
UK Construction PMI street 52.2
Spain unemployment change street (25K) vs previous 44K
Eurozone producer prices street (1.0%) vs previous (1.5%)
Australia retail sales street 0.3% vs previous 0.6%
Upcoming significant economic announcements include:
8:30 am EST US nonfarm payrolls street 180K vs previous 161K
8:30 am EST US private payrolls street 170K vs previous 142K
8:30 am EST US manufacturing payrolls street (3K) vs previous (9K)
8:30 am EST US unemployment rate street 4.9%
8:30 am EST US average hourly earnings street 2.8%
8:30 am EST Canada jobs change street (15K) vs previous 44K
8:30 am EST Canada full-time jobs   street (23K)
8:30 am EST Canada part-time jobs previous 67K
8:30 am EST Canada unemployment rate street 7.0%
9:15 am EST US ISM New York previous 49.2
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