06 Dec 2019

Non-Farm Payrolls

In October, non-farm payrolls increased by 128,000 coming in below consensus, this was mainly impacted by strike action at General Motors (GM). 

We have forecast an increase in the November reading of +185,000. The impact of the GM workers returning to work is estimated to increase the reading by c. 40k alone.  Unemployment figures are also expected this afternoon for November, our forecast is that it will remain at 3.6% (3.6% in October). Stability in employment helps build confidence and stability in consumer spending.

OPEC meeting did not reach a conclusion 

Though it was leaked that OPEC had agreed to cut production by 500,000 barrels/day, the meeting of OPEC ministers broke up yesterday evening without reaching a formal conclusion. They will try again today. Yesterday, evening Prince Abdulaziz bin Salman the new Saudi energy minister, did leave reporters with the intriguing prospect of “beautiful news tomorrow.” Whatever OPEC does decide today, unpicking the detail will be crucial in interpreting its market impact and it is very likely that it is the details of the allocation that held up a decisions yesterday, even if they had broadly agreed that a 500,000 barrels/day cut was needed. In the meantime, the oil market is not quite sure what to do with itself trading $63.40/barrel.


FOMC Preview

The Federal Open Market Committee (FOMC) meets for its last policy meeting of the year next Wednesday, December 11th. The decision is due at 7pm (Irish time) while Chair Jerome Powell will deliver his usual post meeting conference at 7.30pm. We do not expect any changes in the policy decision at this meeting with the Federal funds target rate range held at 1.50 -1.75%. 

The FOMC is now clearly in pause mode as it assesses the impact of the three quarter point reductions to the funds rate made at the prior three meetings. The message from Fed Chair Powell, in the press conference that followed the October decision, was that it would take a material reassessment of our outlook to shift the Fed out of its pause mode. We have not seen this yet. Data releases over the past 5 weeks have not pointed to a clear shift in direction of economic momentum, sufficient to shift the Fed’s baseline economic outlook while trade war developments have also been far from conclusive so have not shifted risks materially either to the upside or the downside. 

Thought of the Day

Market Orders – Take Advantage of Volatility 

GBP remains close to 30-month highs this morning, as markets appear to have priced in a clean win for the Tories next week in Thursday’s UK General election. With still 6 days to go until voting begins, there is however, plenty of time for volatility as markets remains very sensitive to any developments in the leader race. 

Economic Releases

US 13.30 Non-farm payrolls

US 13.30 Unemployment 

US 15.00 Michigan consumer sentiment