A dramatic week on the financial markets ends with a strong day for US stocks while their European counterparts end lower. Non-farm payrolls clear the way for the Fed to raise rates on December the 16th as US Treasuries recover from their initial sell-off and gold price jumps to a two week high. The Euro’s huge gain against the dollar subsided a little on Friday as the greenback bounced off a one month low.
Those moves came after US non-farm payrolls came in at 211,000 slightly ahead of consensus forecasts, while October’s figures were revised higher. Unemployment held steady at 5% however, the pace of average hourly growth slowed from 2.5% to 2.3%. the jobs report was solid paving the way for a rate hike however, the jobs growth does not translate to a comparable gain in GDP due to sluggish productivity growth. The Fed is likely to tread carefully, only bringing rates up slowly at the start of the cycle.
This is viewed positively by the stock market, hence the positive moves on Friday.
Thursday saw declining markets especially in Europe following the European Central Banks underwhelming set of policy easing measures. Local markets were down 3.7% over the week. The ECB’s latest measures announced on Thursday aimed at boosting growth and inflation fell short of expectations. It cut its deposit rate by 10 basis points to minus 0.3% and extended the duration of asset purchases by at least six months. Deeper cuts were expected and an increase to the monthly bond purchases was expected. This caused a traumatic response by the stock market, while the Euro leapt across the board.
Gold had a strong week, ending up $28 at $1,046 an ounce. While oil came under pressure after OPEC stuck with its policy of not constraining oil output. Brent was down 3.6% over the week to $43.24 a barrel.