US futures are slightly higher ahead of the open on Friday, as traders turn their attention away from Capitol Hill and to the December jobs report.
It’s been some week, 2021 has well and truly picked up where 2020 left off. Thankfully – and I wouldn’t bet against being proven wrong – at least on the US political level, I think the worst of the drama may be behind us. This week was a massive step too far and the video put out by the President suggests he knows it too and may now opt to de-escalate.
Joe Biden will become President on 20 January and the topic of conversation can turn back to getting this horrific wave of Covid-19 under control and the economic recovery. The stimulus that was passed at the end of last year avoided a cliff-edge but doesn’t come close to the Democrats ambitions and they now have the numbers, just, to do something about it.
The jobs report today will offer some interesting insight into the state of the economy as more restrictions are forced upon it. The country may not be in full lockdown yet but the numbers are shocking and the new strains are compounding the problem. The country may not opt for a lockdown but clearly more severe measures are coming if there is any hope of getting it under control in any reasonable time.
Initial expectations had been for just shy of 100,000 jobs created last month but the ADP number earlier this week may have forced a rethink. To be clear, I do not look to the ADP for a reliable sense of what to expect from the NFP, but it was a masssive miss to the downside, showing 123,000 job losses. It’s difficult to ignore and actual expectations may now differ from official forecasts.
The unemployment rate is also expected to tick higher to 8.7% but it’s probably not worth reading too much into this at the moment. Participation will also be important but, ultimately, the numbers in the coming months will likely be far worse and give a much better insight into the level of support needed and the size of the task at hand.
Oil holds gains on OPEC+ commitment
Oil prices are holding onto gains after WTI broke above $50 this week on the back of the OPEC+ production agreement. The group – well, Saudi Arabia – went above and beyond what the market expected and the price reflects this. Crude prices were looking a little overextended going into the meeting but the outcome has spurred new momentum.
Saudi Arabia is clearly fully committed to supporting oil prices through these turbulent months and has no desire to risk another price collapse in the persuit of short term gains. And Russia’s determination not to lose market share has been taken into consideration, meaning the two big players have got what they want out of the deal. It’s not a solution that’s sustainable in the long term but it’s a decent plaster to see the group through this severe – and hopefully final – wave of Covid-19.
Gold plunges as yields continue rising
Gold prices have stabilized a little over the last couple of hours after initially smashing through $1,900 early in the European session. The move came as we saw a similar jump in the US dollar which started trending gradually higher yesterday.
This may well just be a bit of a catch up move, with yields having risen all week following the Democrats victory in Georgia which gave them control of the Senate and completing the clean sweep. The promise of more stimulus could mean more inflation and interest rates rising earlier than otherwise expected. The dollar and gold have very much lagged behind in the response.
There will likely be a technical element as well, with it having taken so long to break $1,900. A move back below may have triggered a bunch of stops which would typically exacerbate the move. It also came after the yellow metal failed to break the 61.8 fib around $1,960, which would have been bullish. The question now is whether this marks the end of golds bull run or if there’s more to come. The $1,840-1,860 region could be key on this front.
Bitcoin getting silly now, but will probably keep going
Bitcoin has broken $40,000 less than a month after breaking $20,000 for the first time ever and it’s showing no signs of slowing down. We are very much in speculative bubble territory now and while I don’t think it’s done, it’s becoming increasingly likely that it’s going to get messy as there’s no logic behind what we’re seeing. It’s pure speculation and FOMO and that never ends well. I previously said I wouldn’t be surprised to see $50,000 before the end of the month and I’m now thinking that was too conservative. The last $10,000 move only took four days. It’s getting silly now.
