Not a jobs report for the optimists

There's been a lot of talk this week about whether investors have become too optimistic about interest rate cuts next year and today's jobs report may have brought some crashing back down to earth.

Don't get me wrong, it's not a terrible report by any stretch of the imagination. But it may well convince the Fed that it must proceed cautiously when it next meets. Which makes the 4-5 rate cuts starting in March that markets had priced in a little harder to justify as it doesn't allow much of a turnaround, even accounting for the late pivot that was expected from the Fed.

Despite the setback, markets are still pricing in a rate cut by May and four in total next year so it isn't that much of a setback. The jobs report just wasn't ideal and didn't really fit the narrative that had been building in the markets, some would say too much.

Jobs growth was a little stronger while unemployment unexpectedly fell by 0.2% to 3.7% which came as quite a shock. But it was the wages component that was most disappointing after a few very promising reports. It was never likely to be plain sailing when it comes to wages but today was definitely a small setback.

Ultimately the dot plot next week will tell us where the central bank sees interest rates over the coming years but it won't tell us when the easing cycle will begin, and for that, the forecasts and commentary will be helpful. We're now in a position where a disappointing November inflation report could see the Fed maintain its prepared to hike if necessary narrative, putting a March cut in serious doubt.

Oil set to bring six days of losses to an end

Oil's losing streak appears to be coming to an end after six sessions in the red and around 13% lost from peak to trough. It's up close to 3% on Friday but still below the November lows, highlighting how unimpressed traders were with the OPEC+ "deal". It also suggests they aren't particularly optimistic about the global economy next year.

Gold tests $2,000 after disappointing jobs numbers

Gold is down more than 1% after the US jobs report and threatening to break back below $2,000 in the same week it started by soaring to record highs. It really has been quite the week for the yellow metal and with US inflation and the Fed interest rate decision to come next week, the volatility may not be going anywhere.

Bitcoin rallies despite NFP setback

Bitcoin initially appeared to respond to the US jobs figures but it didn't last very long as while other assets held onto at least a portion of their moves, bitcoin pulled back slightly before jumping to new highs for the day above $44,000. Further evidence that while interest rates do influence crypto, it's very much a supportive factor. ETF excitement is clearly the driving force, it's just a question of how far it can go.