Payrolls Show a Mild Recovery

Published by Filipe R. Costa on Mon, 07/01/2013 - 11:02 in

Daily Market Commentary for January 7: US Non-farm payrolls rose 155,000 in December in line with expectations. The number was welcomed and investors added another day of gains to the already impressive 2013 start. Can it last?

Investors have been optimistic in the start of the year and with the help of economic data they can extend gains over this week, but many concerns still remain regarding negotiations between Republicans and Democrats to be held until March on several important topics that can turn the market bearish if something goes wrong. For now, so far so good, and the 155,000 jobs created in December were a great start in terms of economic data as the report shows the US economy continues to grow and to create jobs, even though at a mild pace. Unemployment rate turned 0.1% higher to 7.8% but that was widely expected and the result of more people entering the work force during the month. The average workweek rose from 34.4 to 34.5 and the average hourly earnings also rose 0.3%, two positive signs. Although the numbers in the report are more or less in line with expectations, we must say the report was relatively strong having in mind December was a tough month due to fiscal cliff negotiations. If politicians can continue to deliver solutions and end the fiscal cliff, the next payrolls reports may come much better, but for now we just don’t believe that will be the case as we have seen politicians prefer last-minute partial solutions to on-time delivery of sensible solutions.

Against analysts’ projections, gold is impressively weak. The published FOMC minutes gave the idea the FED may cut on quantitative easing during the year and the recent economic data looks more impressive than expected leading investors out of the precious metal. At the current price level of $1,654 there may be some buying interest but at CTS we aren’t much convinced and expect gold to continue the bearish trend.

This week it will be interesting to see how markets fare as last week’s volumes were only mild. With the return of the rest of investors, let’s see if the good vibrations will continue.