Gold has rebounded after falling to an 8-week low in the wake of this morning’s jobs report. The yellow metal is now higher on the day and more than $10 off the intraday low.
Nonfarm payrolls for September saw the first loss of jobs in 7-years. The NFP print was -33k, well below expectations of +87k, versus a positive revised +169k in August (was +156k). That low expectation was already deemed to have taken into consideration hurricane distortion, so today’s miss was pretty significant.
Nonetheless, the market was quick to dismiss the bad number as hurricane “noise” and latch on to the better than expected 0.5% rise in average hourly earnings. However, there is perhaps some reason to be suspicious.
Additionally, the trend in payrolls had rolled-over long before today’s negative print and long before this hurricane season.
Today’s intraday rebound in gold — and retreat in the dollar — may just be profit-taking ahead of the weekend, but it could also indicate that investors are taking a more discerning look at today’s data and eschewing that initial spin.
Speculation this morning that North Korea may stage another missile test as soon as next week has heightened risk aversion. A Russian diplomat recently returned from the DPRK told reporters that the mood in North Korea was “rather belligerent” and that they may have a missile capable of reaching the west coast of America.
With the additional risk that Catalonia may declare independence from Spain on Monday, risk appetite seems to be evaporating. How Spain might react to that declaration of independence and the broader implications for the EU present considerable uncertainties. I don’t believe Spain can allow this to happen, so I envision the police or military moving to block access to the Catalonian parliament or even detaining key politicians.
At this point, the Fed funds futures market sees a December rate hike as all-but a sure thing. However, December is still a long way off and those expectations can only be trimmed from here.