A killer jobs report put to rest concerns that the US economy was starting to show signs of slowing down. Employers added 266,000 jobs in November, higher than the median estimate of 180,000 and well above the most optimistic forecasts. The unemployment fell back to a 50-year low at 3.5% and wages rose to 3.1% from a year earlier.
The Fed will have an easy meeting next week as they were spot on with their call to signal rates will be on hold for the foreseeable future. Expectations for a summer rate cut are quickly fading and many would not be surprised if we saw no policy moves till well after the 2020 election.
The trade war remains the biggest downside risk to the global economy, but it seems unlikely the Trump administration will risk a total collapse in trade talks.
The Saudis won the week. Prince Abdulaziz bin Salman made quite a debut representing Saudi Arabia at the OPEC+ meeting in Vienna. The Saudi oil minister stunned markets by announcing an additional cut at the final press conference. The Saudis had a couple goals this week, to secure firmer oil prices and for the Aramco IPO to have positive news before its starts trading next week.
The deeper production cuts by OPEC + was being faded by traders but the surprise announcement that the Saudis would bring their production to 9.7 million bpd stunned markets. Energy traders were expecting OPEC + to simply confirm a supply cut that the market was used to by overcompliance. The Saudi surprise cut exceeded everyone’s expectations.
The other key part of the meeting saw the compliance cheaters come clean and signal they will comply going forward. The big three cheaters are the Russians, Nigerians and Iranians. The Russian got a rule changed that will now not see condensate count on their quota, while the Iranians and Nigerians both admitted guilt to their non-compliance and promised to behave.
Gold lost some off its luster after a barrage of US economic data showed the world’s largest economy has not lost its mojo. The killer jobs number was the exclamation point for the Fed’s call to keep rates on hold. With a strong US consumer still in place despite the ongoing trade war, US stocks, Treasury yields and the dollar have all turned very bullish again. Gold’s bullish outlook has been derailed on trade optimism and now it seems an unbreakable US economy. Its not just about jobs, wages were strong today and sentiment improved.
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