UK & Europe
European shares ended the week lower, marking four successive days of losses and the first weekly decline in three weeks. The German DAX fell beneath 10,710, its lowest since November 16. Stocks in the UK dropped with the FTSE 100 falling to 6240, its lowest since November 17.
Amidst a multitude of market events from a US unemployment report that sealed the deal on a December rate hike to OPEC’s decision to raise its daily oil output quota, European markets were still left reeling from the ECB’s under-delivery of additional stimulus.
The euro moving from near multi-year lows to a one-month high in the space of a day has meant investors have had to quickly reassess their outlook for European stocks given the reduced export-advantage.
Energy was the worst performing sector on the FTSE 100 as shares of BP (L:BP) and Royal Dutch Shell (L:RDSa) sank on news that OPEC would raise its output ceiling. Conversely airlines EasyJet PLC (L:EZJ) and IAG (L:ICAG) were in the top five risers on the UK benchmark on the prospect of a longer period cost savings from lower fuel prices.
Berkeley Group (L:BKGH) led gains amongst house builders after a positive outlook enabled the firm to raise its dividend target sending its shares over 9% higher.
US
US stocks traded higher on Friday after the November unemployment report came in slightly ahead of expectations. The US jobs data has pretty much sealed the deal on a December rate rise.
The US added 211k jobs in November with average hourly earnings rising 0.2% over the month and the unemployment rate remaining at 5.0%.
It was a bit of a goldilocks report that stocks tend to favour. Over 200k jobs were created with moderate wage growth suggesting strength in the economy but not so much strength that it means the Fed will have increase the pace of subsequent rate rises.
US markets are enthused by the potentially more favourable scenario of foreign earnings-boosting dollar weakness despite an imminent rate hike.
FX
The dollar was mostly stronger on Friday after the US jobs data. The biggest gains for the dollar came against the Japanese yen while there was more reluctance to short the euro following yesterday’s massive ECB-induced rally. The Australian and New Zealand dollar were top FX risers in line with commodities.
Commodities
Oil prices tanked after OPEC made the decision to raise the cartel’s output quota to 31.5 million barrels per day. The higher quota doesn’t mean any actual increase in production because OPEC is already pumping out 31.4m b/d as of October estimates. The extra 1.5m supposedly does not include existing production from recently re-joined OPEC member Indonesia. The oil price had some early support on the idea that Saudi Arabia would support a cut in production in conjunction with non-OPEC oil producing countries. The idea of a joint OPEC and non-OPEC production cut was never going to hold much weight while Russia is not involved.
Gold rallied as much as $25 per oz and over 2% after better than expected US jobs data failed to significantly budge the US dollar following yesterday’s big sell-off. Gold had only risen slightly in amidst a big sell-off in the dollar yesterday following the under-delivery from the ECB. Once payrolls were out of the way, gold was able to catch up with other dollar-denominated assets.
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