Spreadex Market Update

Muscular non-farm Friday sees investors’ attention switch from trade war to interest rates



October’s non-farm jobs report somewhat spoilt what was shaping up to be a very tasty end to the week, shifting investors’ attentions from the US-China trade war back to the Fed’s interest rate intentions going forwards.

It was one of the better non-farm Friday’s for a while. The headline figure smashed expectations, coming in at 250k against the 194k forecast and the substantially downgraded 118k seen in September. The unemployment rate held at a 49 year low of 3.7%, with the month-on-month average earnings index slipping from 0.3% to 0.2% as estimated. Yet that latter figure doesn’t tell the whole picture; September’s wages were a whopping 3.1% higher than 12 months previous, the fastest level of growth in almost a decade.

Investors viewed all this through Jerome Powell’s glasses. The strength of the US economy, as suggested by that data, likely mitigates some of the concerns caused by October’s market correction, and leaves the Federal Reserve on track to raise interest rates in December, with the potential for 3 or more hikes across 2019.

The dollar, which had been in retreat during much of Friday, was pretty smug following the news, climbing 0.3% against the pound, euro and Japanese yen. This in turn prevented the Dow Jones from delivering on the 300 point surge suggested by its futures; instead the US index fell around 100 points, slipping back under 25300 in the process.

And while the European growth wasn’t completely erased, the region’s indices were distinctly less jubilant after the US open. The FTSE, which had been flirting with 7200 at one point, saw its gains dwindle to just 0.3%, with the DAX and CAC more than halving their initial advances to rise 0.8% and 0.6% respectively.

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