Market Review & Outlook: Mixed Jobs Report Shifts All Focus to Election Tuesday
James Chen, CMT November 4, 2016 5:16 PM
US Jobs Report
The headline non-farm payrolls employment change for October came out at 161,000 jobs added against 175,000 expected. This fell on the lower end of the 160,000-180,000 range that we projected prior to the release. As noted, however, one of the upside surprises occurred in the headline release – namely, September’s reading that came out in early October was revised sharply up to 191,000 from its original disappointment of 156,000. This raises the average of the past three months up to 173,000 jobs added per month, which can certainly be seen as a strong showing for the recent employment landscape.
The unemployment rate ticked down to 4.9% in October, as expected, from September’s reading of 5.0%. But the second upside surprise was perhaps the most positively impactful of the entire report – October’s average hourly earnings, a key measure of US wage growth, was surprisingly better than expected at +0.4% against prior expectations of +0.3% and up from September’s +0.2%. This represented a highly substantial increase in wages that will likely play a pivotal role in Fed decision-making for December, as well as potentially help provide some support to equities and the US dollar.
With that being said, however, market reactions to the report were both mixed and muted immediately after the jobs release, largely due to other pressing factors currently dominating the markets. One of these factors was the prolonged slide for crude oil, which continued Friday due in part to exceptionally high US crude oil inventories reported earlier this week, doubts about the viability of a proposed OPEC deal to cut oil production, and the latest reports of possible squabbles between major OPEC members, Saudi Arabia and Iran.
US Presidential Election
Of course, the most pressing condition on the immediate horizon lies in the US presidential election to be held next Tuesday, only a few days from now. Despite last week’s abrupt announcement of a new FBI probe into Hillary Clinton’s past emails that has damaged her presidential campaign, Clinton appears to be holding on and retaining a modest lead in general polling and Electoral College projections. It’s now come down to a bitter fight for several pivotal swing states and still-undecided voters, which both Clinton and Donald Trump are desperately trying to sway. As it currently stands, the contest is very close, and any new developments in the few remaining days could easily tip the balance either way.
Within the past week as the race has tightened considerably, fearful stock markets and the US dollar have been heavily pressured, while safe havens like gold and the yen have been boosted on the unpredictable prospects of a potential Trump victory.
In the event of a Clinton win, equities and the dollar are likely to rise as the markets breathe a big sigh of relief, and gold should lose its shine as the uncertainty fades, at least in the initial stages. All of that could quickly change, however, as the reality of Clinton’s economic policy stances could ultimately help drag down the markets. In the event of a Trump win, it is almost inevitable that market volatility will increase considerably due to the sheer uncertainty that Trump currently represents, both politically and economically. This impact could last for months, towards January inauguration and beyond, potentially pressuring both stocks and the dollar to correct and pull back significantly further.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.