Breaking News
Investing Pro 0
Donate to earthquake relief efforts in Turkey and Syria Donate

Strong Jobs Vs. China Reopening; Another Noisy Monday in the Oil Patch

By Stephen InnesMarket OverviewDec 05, 2022 03:55AM ET
www.investing.com/analysis/strong-jobs-vs-china-reopening-another-noisy-monday-in-the-oil-patch-200633110
Strong Jobs Vs. China Reopening; Another Noisy Monday in the Oil Patch
By Stephen Innes   |  Dec 05, 2022 03:55AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
EUR/USD
-0.01%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
US500
-1.00%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Stocks opened to a cautious note in Asia on Monday as investors chew over the impact of the robust U.S. jobs report against the backdrop of an accelerated shift toward reopening the Chinese economy.
 
Focus on China's potential "reopening" picked up steam again last week and fueled market optimism about the tailwinds of a likely acceleration in growth in 2023 for China-sensitive assets. Although there have been several local changes to Covid policies, China has yet to shift away from the Zero Covid policy officially. Instead, they are trying to balance the expected reopening surge in Omicron cases against minimizing economic and social costs.
 
The long and winding road for the world's most populous and second-largest economy to reopen after almost three years of zero-Covid policy will probably take more work.
 
After spending much of the week firmly locked in rally mode in the wake of Chair Powell's latest ruminations, markets received a bold-as-brass surprise from an upstart U.S. payrolls report on Friday. While ignoring the pivot script of fading growth and ebbing inflation, jobs instead posted a backslapping 263,000 advance in November, coupled with a sturdy 5.1% y/y average hourly earnings gain.
 
Still, after the dust settled, U.S. yields ended the week moderately lower, while the S&P 500 eked out a modest gain even with a late-week retreat.
 
Although one should take caution reading too much into one jobs report, the hearty nonfarm payrolls beat does suggest the rumours of growth's demise have been greatly exaggerated.
 
Despite plenty of volatility, including a strong but maybe curious S&P 500 rally on the back of a speech from Fed Chair Powell, markets remain gingerly supported by guidance to a 50 bp downshift in December.
 
Still, investors could be challenged to break higher ground as Friday better than expected jobs data suggests that sticky services inflation, primarily dictated by a still-too-tight job market, will keep the Fed higher for longer.

Oil

 
OPEC+ plans to keep production steady but stands ready to intervene as price caps, embargos, and China's reopening impacts get quantified as to whether there will be a flow disruption or whether Russia has viable plans of retaliation.
 
With recessionary overtures playing louder in the background, OPEC's interventionist aim is likely to keep crude prices from sliding below $80 a barrel, the minimum needed to spare them fiscal trouble. So, if fundamental conditions deteriorate, oil traders should expect some form of immediate production intervention. Hence prices should remain supported on dips below $85
 
With India and possibly China continuing to purchase Russian crude using alternatives to Western services, it will dilute the effect of the sanctions.
 
But there are limited options that can securely transport Russian oil to markets, so the focus will fall on tanker trackers and Russian export levels.
 
Over in Asia, China's reopening sentiment should provide a plank for the crude price to springboard off. And the faster the market prices in reopening-driven growth acceleration, the higher oil prices will go.
 
The combination of rising cases, some regions loosening policies, the winter flu season, and the upcoming Lunar New Year, when hundreds of millions of people typically travel, makes it difficult to predict how mobility will evolve against the backdrop of skyrocketing Covid cases.
 
As usual, there is plenty of Monday morning noise in the oil market, which will undoubtedly lead to a significant uptick in volatility as traders try to iron out these evolving narratives.

Foreign Exchange

 
The U.S. dollar is still struggling for traction in the wake of Chair Powell's speech. The lack of a hawkish beatdown, above and beyond what is already priced into the market, continues to see the dollar rallies quickly fade. Not even a beefy payroll number offered a lengthy lifeline to the buck, as the EUR/USD is still sitting with ample headroom above 1.05 this morning.
 
While the ultimate destination of policy rate usually counts more, setting a gentler course towards the terminal tends to ease financial conditions by lowering rate volatility and skewing FX traders to respond more to downside surprises while looking through upside surprises. Indeed, this will be especially important in the context of fairly robust economic data, including Friday's employment report, which played to the " look through" script.
Strong Jobs Vs. China Reopening; Another Noisy Monday in the Oil Patch
 

Related Articles

Strong Jobs Vs. China Reopening; Another Noisy Monday in the Oil Patch

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email