Equity markets are showing solid gains thanks to the impressive jobs report in the US.

The headline non-farm payrolls update showed that 266,000 jobs were added last month, which smashed the 180,000 that economists were expecting. The October report was given a nice upward revision to 156,000 from 128,000. The unemployment rate returned to 3.5%, the lowest in 50 years. Average earnings on a yearly basis came in at 3.1%, while the previous report was revised to 3.2% from 3%. Across the board it was a great jobs report, and the bullish sentiment has spilled over to this side of the Atlantic.              

The share price of Berkeley Group is holding up alright considering the firm revealed largely poor first-half numbers. In the six month period, revenue fell by over 43%, while profit before tax dropped by 31%. A mixture of fewer houses sold as well as a drop in the average selling price has hit the company’s bottom line. The group is now carrying out more work outside of the greater London area as a way to diversify its portfolio, so that could be partially to blame for the lower average selling price. The UK housing market appears to be off the boil, and Berkeley’s figures reflect that. The house builder maintained its medium term profit guidance – which is probably why the stock isn’t too far from the record-high it posted last month.

It seems to be business as usual for Associated British Foods as the group kept its earnings growth forecast, and Primark is tipped to be the driver of the group’s growth. The low-cost clothing division is tipped to see a small dip in margins due to the softer pound, but then again, costs are expected to be kept under control too. Primark is expected to expand its floor space. In light of the cooler consumer environment, many fashion houses are under pressure, but Primark is doing well as consumers are becoming savvier.   

US

The Dow Jones and S&P 500 are driving higher on the back of the bullish jobs update. The major equity benchmarks have recouped most of the ground they lost earlier in the week when Mr Trump shocked the markets by stating the trade deal with China might not be finalised until after the presidential election of 2020.

Things seem to be ticking along on the trade front. Larry Kudlow, an economic advisor to President Trump, said that Mr Trump likes what he has seen in the trade talks, so that optimism is still floating around too. The trade dispute with China clearly isn’t hurting the economy, so there is less of an incentive to get it fully wrapped up quickly.

At the last Fed meeting, the central bank gave off the impression it won’t be moving rates for the time being. In light of today’s jobs data, it is fair to say the jobs market is strong, so the central bank might keep their rates on hold well into the first-half of 2020.    

FX

EUR/USD has been dented by the rally in the greenback – which was driven by the US employment update. This month the ECB restarted its government bond buying scheme, and given the disappointing economic reports from the region today, it adds weight to the argument the central bank made the right call. German industrial production dropped by 1.7% - its largest drop since the financial crisis. Italian retail sale fell by 0.2%.

It was a double victory for USD/CAD as the US jobs report was impressive, while the Canadian jobs update was disappointing. The unemployment rate in Canada jumped to 5.9% from 5.5%, and the jobs change showed a decline of 71,200, while economists were expecting an increase of 10,000. A slim majority of the jobs lost in Canada were full-time jobs – which adds insult to injury. The Bank of Canada have kept rate steady for over one year, but in light of today’s news, chatter about a possible rate cut might begin to circulate. 

Commodities

Gold has been driven sharply lower by the solid jobs data from the US. The healthy economic update encouraged traders to snap up stocks, which put pressure on gold. To make matters worse, the jump in the greenback hit the metal too. Gold has been broadly pushing lower since September, and should the bearish trend continue, it might target 1,445. Silver has been hit too, and the metal dropped to a level last seen in early August. 

Opec+ confirmed it will cut production by an additional 500,000 barrels per day, but it seems the new output target is only in place until March – when the group of oil producers will meet again. WTI as well as Brent crude are lower today, but keep in mind they pushed higher during the week on the run up to the meeting. The usual infighting of OPEC continues, as the Saudi’s call for greater compliance with the group target, while the likes of Iraq have been overproducing.  

 

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