Equity markets are subdued on the back of the mediocre US non-farm payrolls report. 

Last month 145,000 jobs were added in the US, while the consensus estimate was 166,000. The November report was revised lower to 256,000 from 266,000. A negative revision isn’t ideal, but the initial reading was a massive number. When you average out the December and November reports, it equates over to just over 200,000 – which is respectable. The jobless rate held steady at 3.5%, meeting forecasts. The level is a joint 50-year low. Average earnings on a yearly basis came in at 2.9%, but traders were expecting it to stay at 3.1%. Overall, the update was so-so, and it was a little disappointing that wages cooled. Given the Stoxx 600 hit a record-high yesterday on the back of the faded Iranian fears, so today’s session seems a bit dull.

Ryanair shares hit a level last seen in the summer of 2018 thanks to an upgrade to the full-year profit outlook. The low-fares airline now foresees annual profit to between €950 million and €1.05 billion, and keep in mind the old guidance was €800-€900 million. As far as forward bookings are concerned, things are positive too as bookings for the January to April period are 1% ahead of last year’s figure. Ryanair are great at the airfares price war, and now they are getting better at deriving revenue from additional services.

Superdry shares underwent major volatility today. The stock tumbled on the open, and it was showing losses that exceeded 20%, while now it is only down roughly 5%. The company cautioned that full-year profit might fall to between £0 and £10 million. The very mention of possibly making no earnings shocked traders, but when the dust settled, the sentiment picked up. Group revenue fell by 15.8% in the 10 weeks until early January, but Black Friday was a success and the wholesale business performed well.

US

The jobs report was nothing to get excited about and that has been reflected in the movement in the equity markets. The employment update was neither great nor terrible, it was somewhere in between. There were some positive aspects and pockets of disappointment. As far the US economy is concerned, it is not a game changer.  The readings shouldn’t make any of the Fed members who voted for rates cuts in 2019 regret their decisions, but at the same time, the update didn’t have much for the hawks.  

The slightly optimistic mood on Wall Street has to be put in the context of the high volatility witnessed recently. We are a couple of days on the de-escalation of US-Iran tensions and as far as traders are concerned, the situation is under wraps. On a political note, the issue is still difficult, but while the prospect of a war seems very low, dealers are likely to remain upbeat. Traders will be looking forward to the signing of the first phase of the US-China trade next week.

FX

USD/CAD is in the red due to the so-so US jobs report and the decent Canadian employment update. The Canadian unemployment rate dipped to 5.6% from 5.9%. The employment change showed that 35,200 jobs were created last month, and keep in mind that dealers were expecting 25,000. It was a big improvement on the 71,200 drop posted November. It is worth noting the earnings component slipped to 3.84% from 4.36%.

In has been a quiet day in terms of economic indicators from Europe, hence why GBP/USD and EUR/USD are largely unchanged on the session. The mixed US jobs report has left traders unenthused.           

Commodities

Gold has pulled back some of the losses that were incurred in the past 48 hours. The metal saw huge volatility this week on account to the heightened tension surrounding Iran, and then the subsequent fading of fears. The fact the greenback hasn’t pushed higher today is helping the asset somewhat. If gold can hold above the $1,555 region, the metal could retest the $1,580 mark.

Brent crude plus WTI are in the red as the drop in tensions surrounding Iran has prompted dealers to dump oil. The possibility of a military conflict between the US and Iran seems small, so the war concerns have largely disappeared, hence why oil is lower. It has been a hectic week for oil, but if it breaks below the lows of the week, it could be in for further losses. 

 


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