Non-farm figures pleasant surprise for already happy Dow

The US markets were pleasantly surprised this afternoon as the non-farm employment change figures came in much higher than expected.

The Dow Jones opened higher than yesterday’s close at 17898.5, and quickly hit 17948.5 after the bell. This followed the non-farm figures, which came in at 321k, much higher than the 231k forecast, as October’s figures saw an adjustment to 243k. This was not the only good news; average hourly earnings also rose to 0.4% from 0.1% last month.

As the Dow looks likely to reach 18000 by the end of the year, and non-farm figures come in strong, pressure is now on the US Federal Reserve. Combine these positives with the fact that the dollar is trading at 121 against the yen, and many eager analysts are claiming that the Fed should take advantage of the strength of the US economy by bringing forward a rise in interest rates.

However, these non-farm figures have not been sustained over a multi-month period, factory orders massively missed their targets, and the dollar is reliant on the Bank of Japan-caused weakness of the yen. These factors will likely put off the Fed from making a rushed and potentially unwise decision.

This American positivity crossed the Atlantic to see the DAX and the FTSE continue to rise after yesterday’s Europe-wide decline. The Eurozone appears to have fully processed ECB President Draghi’s comments from yesterday, and have come to the conclusion that they were not as hawkish as they first appeared. Whilst he did fail to provide a firm date for any action, he did still reaffirm his commitment to stimulus, and the warning to Germany that QE does not need unanimous approval means that the Eurozone can still look forward to some kind of economic intervention in the New Year.

This view was epitomised by the DAX today, as it managed to grow by 1.8% despite the Bundesbank cutting Germany’s inflation forecasts for 2015 in half, and shrinking 2014’s figure to 1.4%. Unsurprisingly, as the Eurozone become more QE-positive today, the euro began to suffer once again, regressing against the dollar by 0.7% to reach 1.22914.

Finally, Brent Crude oil, despite rallying slightly earlier in the week, looks set to close out this Friday at around $68.5 per barrel, as investors begin to question the sustainability of these oil levels. As some analysts claim oil will not fall below the $65 per barrel mark, it must be remembered that only a few weeks ago people doubted that OPEC would allow a drop below $70. All bets are off for the perceived ‘low point’ of the liquid commodity.