News & Analysis

Dow Jones jumps after strong U.S employment data; Oil continues decline; Majors finish week on a high to Yen

Jun 4, 2018 | Market Updates

Upcoming high impact news: Bank Holiday New Zealand 11:30 AUD Retail sales 18:30 GBP Construction PMI

Employment data was the main focus of Fridays U.S. session, and it didn’t disappoint! The U.S. economy added 223,000 jobs in May, while economists polled by Reuters expected a gain of 188,000. Average hourly earnings, meanwhile, rose 0.3 percent last month while the unemployment rate ticked down to 3.8 percent. The US30 CFD that tracks the Dow Jones dropped on the data release mainly due to the up tick in Average earnings keep possible rate rises on the cards. But the increase wasn’t a big jump.

“Today’s jobs numbers pack a wallop,” said Mike Loewengart, vice president of investment strategy at E-Trade. But “with significant year-over-year wage gains, the inflation fears of February could pick up steam again, which could bring a chorus of Fed hawks squawking for more rate hikes.”

“These numbers could serve as a wake-up call that our economy is hustling despite geopolitics, but that could also bring added volatility as market participants adjust their expectations for increased Fed action,” he said. Expectations for a rate hike in December ticked up following the report’s release, according to the CME Group’s FedWatch tool.

After the dust settled and buyers had digested the figures we saw a strong rally on the futures that transferred into the market session. The Dow Jones added 219.37, the S&P500 +29.35 and the NASDAQ closed 112.21 pts higher.

Optimism in Europe began before the US session as markets moved higher, the session was mainly focused on political developments in the Eurozone. Little-known professor Giuseppe Conte was sworn in as Italy’s prime minister on Friday afternoon. Spanish Prime Minister Mariano Rajoy was ousted as leader of the country Friday. The incumbent was succeeded by Socialist Party leader Pedro Sanchez after opposition lawmakers backed a motion of no-confidence. When the news hit Rajoy was voted out we did see a small downtick on shares and on the EUR to the USD. Banking stocks performed well, the banking index finished 2 percent higher, and Italy’s FTSE MIB finished 1.49% higher. Gains were seen across the European exchanges, the FTSE +23.57 – DAX +119.38 – CAC +67.13

Oil continued south on Friday as U.S output continues to grow and is close to matching Russian production. Another key point traders are looking at is the spread difference between Brent and WTI. “The big story in the market right now is this emerged disconnect between Brent and WTI. This is a three-year high in the spread differential,” said John Kilduff, founding partner at energy hedge fund Again Capital.

USOUSD finished 129 cents lower on Friday. US Crude ending the week 3 percent lower.

The USD ended the week mixed, it did receive a boost from the better than expected jobs data. The USD gained to the CAD and EUR and Yen but lost ground to the GBP. The AUDUSD staged a strong fightback after trading just over 50 pips lower to finish the week flat at .7566.

The Yen lost ground to the majors as geopolitical drivers eased, the majors all finished the week on a high. The USDJPY and GBPJPY lead the charge. The GJ surged finishing 153 pips higher. Gold had a mixed session on Friday starting but fighting back after the jobs data. This was short lived as sellers moved back in. Price ended the session closing over $5 lower. 1289.60 seen as the next key support.

Good trading from Eightcap.

Sources; CNBC All times are AEST

* The information provided here has been prepared by EightCap’s team of analysts. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and do not reflect the opinions of EightCap.

In addition to the disclaimer on our website, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. EightCap accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.

Please note that past performance is not a guarantee of or prediction of future performance. This communication must not be reproduced or further distributed without prior permission.