U.S. Jobs Report Seems Too Good To Be True

Europe

The FTSE 100 is set to finish the week on a positive note as a solid performance from commodity related companies has lifted the market yet again. It has been a common theme all week, and it has helped set the index part from its Continental counterparts. Concerns about the eurozone manufacturing sector have hurt the DAX and the FTSE MIB.

The US non-farm payrolls report injected volatility into the market. The report showed that 304,000 jobs were added in January, but there was a major downward revision to the December report, which casts doubt over today’s figure. The December figure was revised down to 222,000 from 312,000. A report claimed there was a surge in US government workers seeking part-time jobs to compensate for the government shutdown.

Talktalk (OTC:TKTCY) shares sold-off today after the company warned that profit would be between £10 million and £15 million lower than previously expected. The group cited investment plans and the timing of accounting changes for lowering its guidance. The higher costs associated with switching customers to superfast fibre broadband also hit the earnings forecast. In the third-quarter, 44,000 new clients were added and the churn rate was lower, and investment in a superior service should stand to the company in the medium to long term. The stock gapped lower today, and if the negative move continues it might target the 89p region.

Glencore (LON:GLEN) released its full-year production update. Nickel and copper production increased by 13% and 11% respectively. The company’s zinc output was largely unchanged on the year. The mega miner is been drawn into another dispute with the government of the Democratic Republic of Congo, as state officials instructed the firm to halt its plans to extract uranium from its cobalt reserve. The government body ‘expressed concerns’ about the ‘technical solutions’ at the operation and instructed the unit to be suspended. Investors will be paying close attention to how the situation plays out.

JPMorgan (NYSE:JPM) cut its price target for Fresnillo (LON:FRES) to 1,100p from 1,150p.

US

The major indices are showing small gains. The jobs report was largely positive, if you can trust the numbers. The update showed that 304,000 jobs were added last month, but there is talk that there was a surge in government workers obtaining part-time work in the private sector. The enormous revision to the December report has left some traders sceptical about the validity of today’s headline number. The unemployment rate edged up to 4%, but the participation crept higher too. The yearly average earnings figure was 3.2%, which is solid, but it was a slight dip from the revised 3.3% in December. The jobs market is in rude health, and it seems like the Fed are content to keep their policy unchanged in the near-term.

Amazon (NASDAQ:AMZN) shares are in the red on the back of last night’s quarterly results. Fourth-quarter EPS was $6.04, which easily topped the $5.68 forecast. Revenue was $72.4 billion, and traders were expecting $71.9 billion. The figures were solid, but there were some signs of weakness. International sales grew by 15%, which was a big slowdown from the previous year’s 29%. The online retailer predicts first-quarter revenue of between $56 billion and $60 billion, while analysts were forecasting $60.8 billion.

Exxon (NYSE:XOM) confirmed that fourth-quarter EPS was $1.41, which was well ahead of the $1.08 that equity analysts were expecting. Revenue for the three month period was $71.89 billion, and that undershot the $77.28 billion forecast. The upstream division registered a profit of $549 million, excluding the tax change impact, and that compares with a loss of $60 million in the previous quarter. The downstream division performed well too.

FX

GBP/USD has drifted lower on account of profit taking from last week’s gains. The UK manufacturing PMI report for January was 52.8, which undershot the 53.5 expected, and it was a sizeable drop off from the 54.2 reading in December - which was a six month high. It is a possibility that manufacturers were ramping up their orders towards the back end of 2018 ahead of Brexit.

EUR/USD is a touch higher despite the disappointing updates from Europe. Manufacturing figures from the eurozone were largely disappointing. The German and Italian manufacturing reports showed a deeper contraction that initially expected in January. As of yesterday, the Italian economy is in recession, and now it’s having a soft start to 2019. Headline CPI for the currency bloc slipped to 1.4% from 1.6%, but the core reading edged up to 1.1% from 1%, so at least underlying demand is firm.

Commodities

Gold has experienced low volatility today. The metal reached an eight month high yesterday, and today’s session has been lacklustre. The metal has been in a solid upward trend for over two months, and given the Fed are likely to sit on their hands in the near-term, the bullish move is likely to continue.

Oil is higher again today as traders are concerned about supply from Venezuela in light of the US sanctions against the country. Adding to that, there is a sense of optimism in relation to the US-China trade situation after President Trump said he is hoping a deal can be achieved before the March deadline.

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