It’s fair to say the NFP data released last Friday caught many off guard. The expected increase of 180k jobs in January was absolutely blown out of the water by the actual figure of 353k. Moreover, the figures for December were revised to the upside, revealing 333k new jobs as opposed to the initial figure of 216k. Markets were content to ignore the potential impact a hot labour market may have on the Fed’s decision-making process and take the news at face value, leading to strong gains in stocks and the Dollar.
The Nasdaq Composite gained 1.74% following the news on Friday, whereas the S&P 500 and DJI both continued to break new ground, the former gaining 1.07% by the closing bell, the latter a more subdued 0.35%. The Dollar Currency Index also took the news well, rising 0.87% on the day to close just shy of 104.
Traditional supply and demand dynamics took firm control over oil markets last week. Brent crude got hammered down to $77 a barrel on Friday, from $82 just a few days prior. WTI saw similar losses, falling from $78 down to $72 over the course of the week. Problems in the Gulf aside, the fact remains that global demand is not picking up and markets are struggling to find any reason for optimism surrounding future growth prospects. Chinese PMI data revealed last week that its manufacturing sector had contracted for the fourth month in a row. To make matters worse, non-OPEC oil producing countries are currently pumping out record amounts of crude with the US in particular now producing over 13 million barrels a day. Analysts expect this to continue to increase.
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