US open: Futures dive after a strong US jobs report

US futures

Dow futures -1.08% at 34027

S&P futures -1.3% at 4026

Nasdaq futures -2.1% at 11800

In Europe

FTSE -0.4% at 7579

Dax +0.2% at 14510

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Strong jobs report keeps pressure on the Fed

US stocks have tumbled lower after the latest US jobs report raises questions over how dovish the Federal Reserve can be. With the jobs market still strong and wage growth rising, inflationary pressures remain.

The US saw 263K jobs created in November, well ahead of forecasts of 200k. October’s data was also upwardly revised to 283k in October.

The unemployment rate held steady at 3.7%, defying expectations of a rise to 3.8%, and average hourly earnings also jumped to 5.1% YoY, up from 4.9% and well ahead of the 4.6% forecast, which could be a concern to the Fed. Persistently high wage growth raises the prospect of a wage growth spiral, something the US central bank will be keen to avoid.

This data highlights that the Fed still has much work to do to tame inflation and will keep pressure on the central bank to keep acting.

The data comes following Federal Reserve Chair Jerome Powell’s speech earlier in the week, where is signaled a smaller 0.5% rate hike in the December meeting. However, he also said that rates might need to rise higher than expected. While the market shrugged off those comments on Wednesday, they make much sense in light of this data.

Looking ahead, a speech by Chicago Federal Reserve President Chris Evans will be in focus ahead of the Fed’s blackout period.

Corporate news:

Asana falls 14% pre-open after the work management platform slashed its annual revenue guidance on uncertainty over the economic outlook. Q3 results were solid, beating on both the top and bottom lines.

Uber falls after the CEO said that the ride-hailing firm wasn’t considering cutting its workforce even as competitors cut headcount to rein in costs.

Where next for the S&P?

The S&P500 has pushed above its 200 sma and is just easing back from the multi-month falling trend line resistance at 4100 and weekly high. The bullish RSI suggests that there could be more upside. Buyers would need to rise over 4100 to create a higher high and bring 4157, the September high into focus. On the flip side should sellers successfully defend the 4100, the price could test the 200 sma at 4040 ahead of 4000 the near-term rising trendline. A fall below 3940 creates a lower low.

FX markets – USD jumps, EUR rises.

The USD reverses earlier losses and jumps higher after the strong jobs report means pressure remains on the Fed to keep hiking rates.

EURUSD falls from a six-month high of around 1.0530 after the data. Earlier in the session the euro had risen, boosted in part by comments from the ECB’s vice president Luis De Guindos who said that the economic downturn in the region won’t be as deep as expected even just a few weeks ago.

GBP/USD is falling on USD strength. The pair had rallied to 1.23 earlier as the pound as it benefited from the softer tone surrounding the USD. GBP/USD trades at a level last seen in mid-August as the rally from its all-time low of 1.0340 gathers pace. There is no data driving the gains but possibly a BoE-Fed divergence as the Fed slows the pace of hikes and the BoE is still fighting double-digit inflation.

GBP/USD -0.6% at 1.2190

EUR/USD -0.64% at 1.0454

Oil holds gains ahead of OPEC+

Oil prices are edging higher for a fifth straight session as investors look ahead to the OPEC+ meeting on Sunday and the EU-Russian oil ban, which is due to start on Monday.

The EU has agreed in principle a $60 a barrel price cap on Russian seaborne oil. This would also have an adjustment mechanism keeping the cap 5% below the market price. This still needs to be formally agreed.

Meanwhile, OPEC is widely expected to keep output on hold after cutting output by 2 million barrels in October. The fact that the meeting is virtual has also raised expectations of no action.

Optimism surrounding the reopening in China is adding to the upbeat mood towards oil. Easing lockdown restrictions fuels optimism that China could move away from the zero-Covid strategy, lifting the oil demand outlook.

WTI crude trades +1.4% at $81.68

Brent trades at +1.3% at $88.05

Learn more about trading oil here.

Looking ahead

15:15 Fed Evans speaks

15:45 Baker Hughes rig count

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