It’s a rare day when the keynote data release of the month is not the main headline act to round up the first week of December. But it’s been no ordinary year or month so far with the Omicron news grabbing the world’s attention with every scientist’s view under the spotlight.
Yesterday saw a sharp rebound in risk appetite with US stock markets bouncing back. Defensive sectors underperformed while energy and industrials headed the pack of leaders. This helped the Dow post a gain of 1.8%, which lifted it above its 200-day simple moving average. Prices had been oversold on the daily RSI, but bulls will be looking for more gains into the weekend after the latest job market data.
Non-farm payrolls expected to be solid
Analysts forecast a print of 550k for the headline number and unemployment to fall one tenth to 4.5%. All things being equal, momentum in employment growth is expected to persist, pushing the jobless rate ever lower. Wage growth is set to stay steady given the tight labour market. Employers likely continued to boost wages to attract and retain workers and this may give new indications to the potential path of inflation in the coming months.
The weekly jobless claims numbers were once again impressive yesterday, with the prior week falling to their lowest level since 1969. Of course, the growing risk of a winter Covid wave, be it Omicron or Delta, which was already under way in Europe, plus a dwindling supply of available workers could turn the data.
DXY looking more positive
The Dollar Index has been consolidating recently after hitting multi-month highs a few weeks ago at 96.93. We were actually on course to print a weekly “doji” candle, which is quite understandable given the amount of uncertainty. Support sits at this week’s spike low at 95.51 and the greenback is finding a bid this morning as Omicron fears ease.
The Fed is seemingly on its way to a faster taper, with inflation expected to stay above 3% throughout next year and more Fed officials singing from the same sheet. Of course, we are all beholden to concrete evidence regarding Omicron transmissibility and vaccine effectiveness over the next few weeks. But a solid jobs report today, pushing the unemployment rate closer toward full employment around 3.8%, should support the dollar in the near term on its way to the 96.60 area.
Oil stabilises after surprise OPEC+ decision
Saudi Arabia and its allies in the OPEC+ alliance agreed to continue increasing monthly crude production, delivering a small victory to consumer governments including the US who had been pushing for lower prices. Expectations before the meeting had been for a pause in supply increases for a month.
The immediate reaction saw Brent initially fall around 4% but it eventually finished positive on the day. The market appears to have taken comfort in the fact that OPEC+ is willing to reconvene and change production if necessary due to the Omicron situation. That said there is still a huge amount of uncertainty and Brent will need to climb back above the 200-day moving average at $72.89 to convince more buyers to keep the long-term uptrend intact.
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