Now that the glorious job numbers have been produced Wall Street has rocketed up via the S&P 500 to 1418.00. Say what? That is below the September high and right around its average since the spring. Crude Oil, certainly that has done better with the sun coming out……….ahh no, WTI is at 85.93. So much for demand. Gold is at 1705.00 USD today, Saturday. And the EUR for all of its jump in value the past two weeks has sunk again and is near 1.2927, which has been its essential average since September. In other words the more things change the more they stay the same, particularly since most of the major questions pertaining to the United States and Europe have not been answered – meaning that plenty of bad economic data continues to be seen and quantified financial hurdles have not been solved.
The University of Michigan’s Preliminary Consumer Sentiment reading turned in a bloodletting 74.5 result yesterday considering that the estimate was 82.4. The result is not a particularly a good sign now that American consumers are entering the heart and soul of the holiday shopping season. While the Non-Farm Employment Change was 146K compared to the forecast of 89K, confidence is not exactly flowing from the mouths of corporations and their human resource hiring departments.
As this weekend unfolds investors should expect a full press attack from Democrats against Republicans regarding the ‘fiscal cliff’. If Republicans were waiting on the results of the Non-Farm Employment Change and counting on it to be negative in order to ramp up their debate they will now find themselves on the defensive if that was the only ammunition they had counted on. Politics are often led by short-sighted rhetoric in order to justify long-term ambition and we should expect nothing less from both Democrats and Republicans (and that is not a good thing folks). While the Democrats may have the upper hand going into this weekend because of a ‘good’ jobless outcome, Republicans should be smart enough to know one report is not a sea change and many issues that are of significance remain as talking points.
This coming week will offer up plenty of other interesting focal points for investors besides the ‘fiscal cliff’ scrum. The German ZEW Economic Sentiment reading will be on Tuesday. Germany has seen brutal economic data the past week and a bad number via the ZEW report would not be taken lightly. Trade Balance numbers will come from the States on Tuesday, but more importantly on Wednesday the Fed will release their FOMC Statement regarding monetary policy. Thursday will have Retail Sales figures from the U.S. and Friday will see the Flash PMI Manufacturing results from Germany and France. In essence all of these reports will certainly set the tone before the holiday season begins to take over and volumes drop off the closer Christmas gets. Next week should see full throttle trading and traders should expect volatility.
What we have seen this past week is that the EUR was able to climb to new short-term highs but that its value had been ‘cooked’ into the dough before Mario Draghi and the ECB set forth their press conference. Questions about Greece have not disappeared, and the there have been reports that indicate the ECB is contemplating a reduction of its interest rate which is now 0.75%. One of the keys for the central bank on the continent will certainly be Germany’s economic data, fear of a recession in the engine that drives Europe could be enough to make the ECB move.
As we have been warning the broad markets remain the playground of short-term traders who are able to take advantage of trends and know when to get in and out of their respective wagers. Investors keen for the long-term must continue to rely on their outlooks and have patience. The broad markets including equities, commodities, and forex remain cautious and choppy.