US jobs data and trade-talk progress fuelled a week end rally

A positive end to a volatile week

Last week's trade ended on a bit of a high note. Following several volatile days, US equities surged on Friday night, following the release of US Non-Farm Payrolls data, and the reporting of some positive trade war news. It fostered a risk on atmosphere in markets, and that's setting up a strong start for the ASX 200 this morning. Also, one for the bulls: oil market fundamentals were strengthened by OPEC+ plan to cut global crude production. Turning to the week ahead, and it's going to be huge, with several key events highlighting the market-calendar – and raising the prospect another breakout in price volatility.

US jobs numbers keeps confidence in US economy

It was one of those prints that could aptly be described as “Goldilocks”: US Non-Farm Payrolls showed a bumper print, allaying some levels of concern that the US economy is winding down for this cycle. The data revealed an additional 266,000 jobs were created in the US last month, well above market expectations, and that the unemployment rate fell back to a 50-year low of 3.5%. Crucially, too, wage growth came in a little softer than expected. It printed slightly lower last month, at 0.2%, keeping the risk for an inflation out-break, and therefore a Fed rate cut next year, relatively low.

Trade-talks progress still be assumed

Good news was also received on the trade-war front on Friday – and it came from both sides. News flowed through the market on Friday that Chinese policymakers are in the process of waiving certain, existing tariffs on US soybean and pork products. The good vibes engendered by that story was supported by comments made by Trump trade advisor Larry Kudlow, that trade-negotiators are working “around the clock” and that “progress has been made” on the trade-war. Both news-stories boosted hopes that some sort of “phase-one” trade-deal remains on the table, and the next round of tariff-hikes, scheduled for December 15, will not go ahead.

Market’s loaded up on risk to end last week

The price action in response to the US jobs print, and trade-war developments, was undoubtedly bullish. US equities went on a tear, with the S&P 500 climbing 0.91% , and towards new record-highs. European equities also received a considerable bump to end the week. US Treasury yields leapt, and that supported a rally in the US Dollar, which had suffered falls earlier in the week as-a-result of the perceived deterioration in US-China trade-talks. Gold prices dropped because of the stronger greenback and higher yields, shedding almost 1%, as industrial metals and other growth sensitive commodities broadly climbed.

ASX set to open higher, after a down-week

North American markets’ bullish close has set-up the ASX200 for a positive start to the week. SPI Futures are suggesting the benchmark index ought to open around 35 points higher this morning. The ASX finished on a fairly positive note on Friday, however, it proved of little consequence in the broader scheme of last week’s trade. The trade-war induced volatility saw the ASX200 drop over 2% over the course of the week. Despite this poor performance for Aussie equities, and what are some sketchy fundamentals, the trend is still pointed to the upside for the ASX, with new record highs for the market still in reach.

OPEC+ pledge to cut oil production

Price action in oil markets was notable on Friday, too. In part supported by the prevailing bullish sentiment in the market to end the week, crude received a lift after OPEC+ announced it planned to cut production by around 500k barrels per day. Though that figure alone was considered rather piecemeal, Saudi Arabia pledged to cut its national production, in a bid to ensure that the projected oversupply of oil in the global economy in 2020 is avoided. The news saw Brent Crude prices spike 1.6% on Friday, to trade at levels not seen since September’s price spike.

Will this week prove to be 2019’s Grand Finale?

Last week’s trade was defined by a long-awaited return of market volatility; and that theme may well persist into the week ahead. It’s going to be a big one for global markets, and might prove to be 2019’s grand finale. The market will be positioning for a handful of risk-events, that could equally shift trader sentiment, just as much as macroeconomic fundamentals. The US Federal Reserve and European Central Bank meet on Thursday morning and Thursday night, respectively. The UK General Elections will be held practically on the same day. And the trade-war will remain in focus, with tariff hikes still scheduled for the 15th.