Dow futures +0.6% at 32186
S&P futures +0.5% at 3735
Nasdaq futures +0.2% at 10707
FTSE +1.9% at 7142
Dax +21% at 13407
NFP headline & unemployment both rise
US futures are rising despite an upside surprise from the US non-farm payroll. The US saw 261k jobs added in October, well above the 205k forecast and just down slightly from 288k in September.
The unemployment rate ticked higher to 3.7%, up from 3.5%, but interestingly the participation rate fell slightly to 92.7%, suggesting that higher inflation, the cost-of-living crisis, and higher wages still aren’t pulling workers back into the labour market.
Average wages rose by more than expected by 0.4%, up from 0.3% as workers get paid slightly more for their work.
This data is not showing any major cracks but the labour market, yet the market reaction of rising stocks and a falling USD, suggests markets aren’t fearing that this report will prompt a more hawkish stance from the Fed. This could be because Fed Powell was so firm in his hawkish stance earlier in the week.
Separately expectations are rising that China is moving towards exiting its COVID strategy is also helping to boost demand. Several policy moves from Beijing moves have suggested that
PayPal is falling after it cut its annual revenue forecast, warning of a bleak outlook for the holiday quarter as consumers cut back on spending.
Starbucks is rising 3% after beating quarterly expectations for sales and profits as consumers spend more on expensive drinks.
Where next for the S&P500?
The S&P500 fell below its 50 sma before finding support at 3700 and rebounding higher. The price has retaken the 20 sma at 3725. A break over 3800, the October high, and 50 sma could bring 3915, the November high, into focus. Meanwhile, a fall below 3700 round number could bring 3570 into focus and 3490, the 2022 low.
FX markets – USD falls, EUR rallies
The USD is falling after the stronger headline NFP jobs number is being offset by a tick higher in the unemployment rate. The upbeat mood in the market surrounding China is adding to the risk on mood, hurting demand for the USD. The US dollar index trades around 2-day lows
EURUSD is extending its rally, climbing over 0.9850 as it looks towards 0.99. The eurozone composite PMI was upwardly revised to 48.6, but still points to a recession looming. German factory orders fell more than expected by -4%
GBPUSD is rising, recovering from a steep decline in the previous session. The BoE warned that peak interest could be lower than where the market expects. This is in sharp contrast to the Fed’s warning that interest rates are likely to rise above expectations. The divergence in the rate could keep pressure on the pound going forwards.
GBP/USD +0.82% at 1.1250
EUR/USD +1.18% at 0.9864
Oil jumps on China optimism
Oil prices are surging higher on optimism that China could be looking to exit its zero-COVID strategy. Rumors have been building over the past week that the world’s largest importer of oil could be considering how to end the strategy, which has been its economic Achilles heel across the year.
The disruptions from COVID lockdowns and the uncertainty of the economic outlook owing to lockdowns had weighed on the demand outlook for oil, particularly given that cases are approaching a 6-month high. This could be a game changer for the oil demand outlook and is overshadowing lingering supply concerns.
The slightly weaker USD is also helping oil prices higher.
Oil is set to rise 4% across the week, its third consecutive week of gains.
WTI crude trades +4% at $91.20
Brent trades +3.5% at $97.72
17:00 Fed interest rate decision