The S&P 500 climbed for a 7th straight session on Friday and the dollar moved higher following a Goldilocks non-farm payroll report. Hot jobs growth combined with tepid inflationary pressure from wages, boosted US stocks towards record highs whilst spurring President Trump to encourage the Fed to ease monastery policy.
196,000 jobs were created in the US in March, rebounding from 20,000 in February. Unemployment remained at 3.8%, a historically low level. Wages grew at a lower than forecast 3.2%. The US jobs report hitting the sweet spot, in addition to Trump boasting that an “epic” trade deal was near completion pushed riskier assets towards a strong close on Friday.
The positivity from Wall Street didn’t fully spill into Asia at the start of the new week. Asian markets were mixed, as investors digested the NFP report and trade deal developments, whilst oil rose. European markets are also pointing towards a mixed start to trading after the opening bell.
Oil at 2019 highs
Crude rallied to a 5-month high in early trade on Monday amid ongoing OPEC production cuts, US sanctions on Iran and Venezuela, encouraging trade headlines and fighting in Libya. An escalating conflict in Libya is prompting fears that supply could be disrupted in the oil rich state. The fighting is away from oil fields at the moment. However, the volatile nature of the situation means that the risk of fighting spreading towards the oil fields is increasing by the day.
Looking at the fundamentals there are many factors supporting the price of oil, particularly on the supply side. Demand factors have been taking a back seat recently. That said, the better than forecast US jobs data will be lifting demand expectations. Right now, there are plenty of reasons to assume that the current strength in the oil market is here to stay.
Oil bulls broke convincingly through resistance on WTI crude at $63, and are now attacking $63.50. A meaningful move through this level will level could open the doors to $64.00. To the downside support can be seen at $62.50 prior to $62.00.
Brexit update
The pound edged higher versus the dollar and the euro in early trade on Monday after ending the previous week flat versus both currencies. The clock continues to tick towards Friday’s Brexit date, which will keep the pound under pressure. Theresa May is to continue talks with Jeremy Corbyn in an attempt to end the Brexit deadlock and find a cross party deal which can be pushed through Parliament.
May will meet with EU leaders on Wednesday to make her case for another short extension to Article 50. With the pound at $1.3050, traders are uncertain as to whether the EU will agree to Theresa May’s request. The EU’s preferred extension of around a year, plus potentially toxic EU elections in May, could prove too much for any Brexiteers in Parliament to swallow.
Opening calls
FTSE to open 3 points lower at 7443
DAX to open 30 points lower at 11979
CAC to open 2 point higher at 5478
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