U.S. stock futures were climbing higher ahead of the November jobs report after China was seen as finally moving forward with tariff waivers for some soybean and pork purchases from the US. Markets are fairly confident we will see U.S. President Donald Trump pass on the Dec. 15th tariff threat. Treasuries are rising, while the U.S. dollar is slightly stronger against its European trading partners while falling to the commodity currencies.
NFP
The bright spot of the U.S. economy remains the labor market, but mixed signals could make this nonfarm payroll report particularly interesting. Economists are expecting for a strong rebound of 183,000 jobs created in the month of November, up from the 128,000 seen in the prior month. Yesterday’s jobless claims and Michigan confidence readings support calls for tightness in the labor market, but ADP’s employment change posted the lowest rise since May and the Conference Board’s consumer confidence reading continued to decline for a fourth consecutive month.
Regardless of today’s employment number the Fed will remain on hold next week. A softer reading will likely support calls for that the summer rate cut to possibly happen sooner, with only a major collapse trade talks being the only catalyst that could warrant additional easing much sooner. A strong labor reading would justify the Fed remaining on hold and improve expectations for a strong holiday shopping season.
Oil
Oil prices could be setting up for the buy the “500K deeper cut talk” and sell “the devil in the detail.” The Saudis have been very methodical in handling this meeting and once again have not allowed oil ministers to give final comments ahead of entering the closed door meetings. This OPEC + alliance production cut agreement seems destined for critique as the quotas from the oil producing cheaters, will ultimately be used to calculate if we are really seeing any additional supply taken off. Russia is likely to have its condensate production excluded but that will only take off just under 40,000 barrels from their quota. Russia will still need to refrain some production it seems and that will make compliance readings critical in the coming months.
If oil prices can remain resilient and only see limited pressure following today’s OPEC + decision, we could see a broadening formation open the door for WTI to test above the $60 a barrel handle, while Brent will target the $65 a barrel level. Options pricing shows many investors are looking to fade this move so we should see enhance volatility over the coming days.
Gold
Gold prices seem set for another positive week as trade uncertainty persists and global economic weakness will likely see major central banks deliver additional stimulus later next year. Leading indicators for the nonfarm payroll report suggest we could be seeing softness in the labor market and that will support calls for the Fed to resume easing in the summer.
Bitcoin’s mid-week rally continues to be faded as the crypto-space seems to struggle to find new investors. Bitcoin could eventually see some gains as other digital coins continue to plummet. The crypto-space seems destined for further consolidation and we should see Bitcoin remain the best of breed.