Financial market research and analysis

Weak economic data and anxiety over global growth made for another turbulent session on Wall Street. Apple dived 9% as it cut revenue guidance owing to weak Chinese sales and disappointing upgrades. The Apple bombshell plus weak US manufacturing data sent the Dow 2.8% lower. As a growing number of signs of the negative impact of the US – Sino trade war materialise, its worth keeping in mind that Apple could just be the start of a long list of firms having to lower guidance.

Moving into Friday, sentiment and global stocks perked up on optimism that some progress will be made in coming US – Sino trade talks. There is a level of caution which will cap gains; this is by no means the first time that the equity indices have gained on the hope of deescalating trade tension

Crude moves higher as OPEC Cuts to take effect
WTI crude oil traded high early on Friday, putting it on track for its sixth straight session of gains. Oil was so oversold that it is managing to shrug off recent data disappointments. Even as Chinese and US manufacturing activity fell short of expectations, and concerns over a slowing global economy grew, oil still closed 0.8% higher.
Despite the recent turmoil, oil markets are set to receive some support going forward, as OPEC agreed supply cuts are due to kick in. If OPEC stick to the plan, then within a matter of months the supply glut could be mopped up and oil prices stabilised. Taking into account increased US production we could still see oil back to $55 in the Q1 of 2019.

US non-farm payrolls to boost the dollar?
Wednesday’s dismal manufacturing data combined with growing concerns over the health of the global economy threw into question the Fed’s ability to hike rates this year. As a result, the dollar traded 0.4% lower versus a basket of currencies. Traders will be watching the US non farm payrolls closely for signs that the Fed could end up cutting rather than hiking rates later this year. A rate cut is now fully priced in for 2020.

The jobs report is expected to show that 177,000 new jobs were created in the US in December. This would total 2.45 million jobs created in 2018, the most since 2015. Notably, December’s estimate is the lowest medium projection since last January.

Whilst the number of jobs created in November fell well short of expectations at 155,000, there are some signs pointing to a strong print later today. The ADP employment report saw the best job creation since February 2017 and the fourth largest monthly job creation since 2009. There is a chance that economists have been caught up in market pessimism, setting up the jobs data for a positive surprise.

A stronger than forecast reading could help the dollar pare some of the losses from the previous session. However, a weaker than forecast figure would be ammunition for dollar bears, potentially pulling the dollar below 96.00 a level which has acted as a support across the past month, before it moves down to test October’s low of 94.00.

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