North American News
The bid for stocks and bonds is relentless
- Long-dated bond yields continue to fall
We’re back to where we started.
US markets have completely erased the moves after the strong non-farm payrolls report. The S&P 500 is now down just 5 points to 4071 and on track for a weekly close above 200-day moving average for the first time since April. It’s an impressive performance.
One line of thinking is that bond market participants are trying to get ahead of ‘the next big trade’ which is the weakening of the global economy and a fall in inflation. Whatever it is, the decline in yields is sapping the US dollar.
US November non-farm payrolls +263K vs +200K expected
- November 2022 US employment data from the non-farm payrolls report
- Prior was +200K
- Unemployment rate 3.7% vs 3.7% expected
- Prior unemployment rate 3.7%
- Participation rate 62.1% vs 62.2% prior (was 63.4% pre-pandemic)
- U6 underemployment rate 6.7% vs 6.8% prior
- Average hourly earnings +0.6% m/m vs +0.3% expected (prior +0.4%, revised to +0.5%)
- Average hourly earnings +5.1% y/y vs +4.6% expected (prior +4.7%)
- Average weekly hours 34.4 vs 34.5 expected
- Change in private payrolls +221K vs +190K expected
- Change in manufacturing payrolls +14K vs +20K expected
- Household survey -186K vs -306K prior
The wages number is a concern and could stoke second-round effects on inflation.
Fed’s Barkin: Labor supply looks like it will remain constrained
- Barkin speaks on “Is a labor challenge coming?” in Virginia
- Fed’s efforts to bring demand back into balance won’t be easy, particularly with household excess savings and fiscal stimulus
- Fewer workers would contain US growth
- “Increasingly, I fear we are moving to an environment where labor is short, not long.”
- “I talked to a fast-food brand that described how automation and robotics could reduce store staffing by half”
Fed’s Evans: We are on a path to get financial conditions appropriately restrictive
- Comment from Evans
- We’re on a path to get financial conditions appropriately restrictive to bring inflation down
Timiraos: Strong jobs report keeps the Fed on track to hike by 50 bps
- Report from the WSJ Fedwatcher
WSJ Fedwatcher Nick Timiraos is out with his latest after the jobs report:
The strong November jobs report keeps the Federal Reserve on track to raise interest rates by a half percentage point at its meeting in two weeks and underscores the risk that officials will raise rates above 5% in the first half of next year.
Commodities
Gold moves back above its 200 day moving average. 100 week MA in play as well.
- 200 day moving average at $1795.76. 100 week MA at $1800.32
Gold has seen its price move lower on the back of the stronger than expected US jobs report and higher dollar. But as they dollars gains have been eroded, the price of gold has likewise seen a rebound back to the upside.
The price has moved back above its 200 day moving average at $1795.75. The price is currently trading above and below that MA after reaching to a corrective high at $1798.55. The 200 day MA is a barometer for the buyers and sellers. Move above is more bullish. Move below is more bearish. Before yesterday, the last time the price traded above its 200 day moving average is back in mid – June.
Taking a broader look at the weekly chart, the price of gold is approaching its key 100 week moving average. That level comes in at $1800.32. The high price this week reached $1804.45. Getting above that weekly moving average would be a another positive from a technical perspective. Stay below is more bearish.
For the trading week gold is up around 2.36%.
Silver soars to 6-month highs above $23.20 on weak USD
- Silver price tumbled to its daily low but rallies to six-month highs at $23.22.
- US Nonfarm Payrolls report smashed estimates through an increase in wages to pressure the Federal Reserve.
- Silver Price Analysis: Upward biased, eyeing $24.00 and beyond.
Silver price rallied back above $23.00 after the release of an upbeat US jobs report bolstered the US Dollar (USD), while US Treasury bond yields advanced. Initially, the white metal trimmed some of its gains, traveling towards its daily low of $22.59, though as the USD weakens, it is rising again. At the time of writing, XAG/USD is trading at $23.13.
Federal Reserve pressured by an upbeat US employment report
Investors sentiment remains sour as US stocks trade with losses. The US Department of Labor (DoL) revealed that November Nonfarm Payrolls had risen 263K above estimates of 200K but trailed the previous month’s upward revised 284K, exerting pressure on the Federal Reserve (Fed). Delving into the data, the Unemployment Rate persisted around 3.7%, but wages increased. Average Hourly Earnings rose by 5.1% YoY, up from October’s 4.9%, adding to inflationary pressures.
Should be noted that the employment report would keep the Federal Reserve on the path to continue tightening monetary policy, even if it signifies to do it at smaller sizes, as the Federal Reserve Chair Jerome Powell stated on Wednesday.
The Federal Reserve’s decision to moderate hikes was further justified by a weaker Institute for Supply Management (ISM) Manufacturing PMI report for November. The index dropped to the contractionary territory at 49.0 but also portrayed conditions deteriorating. The data reignited recession fears as the US central bank continues to tighten policy. Indeed, the Federal Reserve is trying to slow the economy, accounting for below-trend growth, as the Fed Chair Powell had said.
In the meantime, after reclaiming 105.000, the US Dollar Index (DXY) drops 0.12%, down to 104.610, contrary to US Treasury yields. The US 10-year T-bond is yielding 3.559%, up five bps, bolstered by traders readjusting the peak for the Federal Funds rate (FFR) at 4.94%.
What to watch
Next week, the US economic docket will feature the ISM Non-Manufacturing PMI, Initial Jobless Claims, the Producer Price Index (PPI), and the University of Michigan (UoM) Preliminary release of the Consumer Sentiment.
WTI crude oil settles at $79.98
- Crude oil down -$1.24 or 1.53%
The price of crude oil futures settled at $79.98. That is down -$1.24 or -1.53%.
- The OPEC+ meeting will take place virtually on Sunday. No change in production is expected.
- The price cap looks to be set at $60 for Russian oil
- The Russian sanctions will also go into effect cutting off all imports of Russian imports. Those will stop on Monday.
So there’s a lot in the air that could have an impact on supply. On the demand side, China and its Covid policy remains a wild card for global demand.
EU News
European equity close: Some resilience after the non-farm payrolls slump
- Closing changes in Europe
- Stoxx 600 -0.1%
- UK FTSE 100 flat
- French CAC -0.2%
- German DAX +0.3%
- Italy MIB -0.4%
- Spain IBEX -0.25%
On the week:
- Stoxx 600 +0.5%
- UK FTSE 100 +0.9%
- German DAX -0.2%
- Italy MIB -0.5%
- Spain IBEX -0.5%
Other News
Poland formally agrees to $60 Russian oil price cap with review mechanism
- That clears the final hurdle
WTI crude oil is down 14-cents to $81.15. The rest of the G7 (and Australia) will need to approve the deal in short order. It’s set to go into effect on Monday, which is the day after the OPEC+ meeting.
Next week could be an interesting one in the energy market.
Freeport LNG now says it will restart initial production around year-end
- Previously guided to mid-December
The latest restart means less LNG for Europe and more gas trapped in the USA, though I don’t think a two-week delay is material. At this point, it’s tough to take management seriously because this has been punted forward several times. You start to wonder if there’s a problem with the project’s engineering.
Natural gas spiked this week but has slowly given it all back.
Cryptocurrency News
Binance native token BNB and staking derivatives bleed after $5 million DeFi exploit on Ankr Protocol
- Binance exchange platform’s native token BNB and its staking derivative tokens nosedived after a $5 million exploit on a DeFi protocol.
- DeFi protocol Ankr, a node-as-a-service platform suffered a hack due to a bug in its code that allowed for unlimited minting of its token.
- The exploit increased selling pressure on Ankr Reward Bearing Stake (aBNBc) and Binance Coin (BNB).
Binance’s native token BNB suffered a 3% decline in response to the $5 million exploit on DeFi protocol Ankr Protocol. The BNB chain-based protocol confirmed that it has fallen victim to a multi-million dollar exploit.
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