USD gains after NFP beat; Stocks fade following strong start

Summary:

• USD recoups losses after stellar NFP

• CAD slips a little on jobs report

• Stocks hand back earlier gains on trade developments

• Oil set for large weekly loss as US announce sanction waivers

• Stock of the week: IBM

The US jobs report from October has come in better than forecast with a lot to like about the latest read on the labour market. The headline employment change rose by 250k, its largest jump since the March release and well above the 190k expected. The prior reading was a disappointing 134k, and this was also revised lower to an even worse 118k in what is the worst part of the release, but on balance the good news seems to outweigh the bad. Further positives can be found in the participation rate ticking up to 62.9% from 62.7% prior and while the average earnings matched expectations, it did rise nonetheless. The unemployment rate remained unchanged at 3.7%.The US dollar has caught a steady bid since the release and has recovered some of the declines seen during Thursday’s swoon.

At the same time as the US jobs report is released, the Canadian equivalent is also announced, and given that the Lion’s share of attention is south of the border, it’s easy to overlook some good trading opportunities on this. The employment change for October in Canada came in at +11.2k vs +15.0k expected, marking a pretty large drop on the prior print of 63.3k. The composition of the jobs was better however, with full-time roles increasing by 33.9k (20k exp, prior -16.9k) and part time falling by 22.6k (-4.1k exp, +80.2k prior). USDCAD has seen quite a lot of chop lately with a push higher on Wednesday met with a bearish engulfing candle yesterday. Today the market is rising after the US and Canadian jobs release with 1.3050 now possible support and 1.3170 resistance.

Global equities were on the rise this morning on new hopes related to a possible trade deal between the United States and China but these gains have been handed back as the day wore on. A tweet from a senior CNBC reporter just prior to the NFP release changed the flow a little though. The earlier reports this may be wishful thinking according to a prominent reporter, who has claimed via Twitter that “there is a long way to go” to reach an agreement. The bulk of the gains have been handed back since and the markets are coming back under further pressure heading into the weekend.  

The imminent US sanctions on Iran have been a key driver of the Oil price in recent months, with crude hitting a 4 year high at the start of October on fears of a sharp supply shock, before the market tumbled as the fears were allayed. This afternoon, on the eve of these sanctions coming into effect there’s been some further developments on this front with the US announcing waivers for several countries purchasing Iranian oil. Eight countries including Japan, India, and South Korea will keep buying Iranian crude after the US reimposes sanctions from Monday 5th November. Oil has dropped lower once more today with the market looking set for another big week of losses. The break below 75.20 on Wednesday proved significant and while price remains below here further declines towards 70.40 are possible.   

International Business Machines (IBM.US) surprised public on Sunday with announcement of huge acquisition. There were rumours earlier this year that the deal may be made but it seems that no one anticipated it to happen so fast. In this analysis we will take a look at the details of the deal as well as examine the latest IBM’s earnings report.