Wild Swings Highlight Debate Over Market Top

The Dow recovered from a 785-point plunge overnight. It still closed the session in the red but the Dow managed to close significantly off session lows. These wild swings that we are seeing show just how unsure investors are regarding the future direction of this long-in-the-tooth bull market. As far as the day's news, a more cautious Fed went some way to alleviating concerns over where exactly relations stood between the US and China.

European bourses are pointing to a strong start on the opening bell after a string of heavy losses yesterday. The meaningful jump higher comes despite the slimmest of recoveries in Asian markets overnight and the continued decline in oil prices.

Oil traders look for cut confirmation today

Oil skidded lower in early trade, extending losses from the previous session as OPEC failed to reach a final decision on cutting output. The cartel is widely expected to limit production, but the level and distribution of these cuts is still an area of discussion for today. WTI slipped 2.6% yesterday and is down a further 0.8% in early trade. The market is expecting a cut in the region of 1 – 1.3 million barrels per day. Anything short of this and oil will quickly be testing support at $50. That'd be right about where Donald trump wants it.

NFP to show cracks appearing in jobs market?

A combination of bad news, a cautious fed and poor data sent the dollar tumbling on Thursday. Whilst the dollar remained steady overnight, all eyes are looking towards the release of the US non-farm payroll later today. Leading towards the reading, the dollar has been rattled by the inversion of the yield curve and fears of slowing global growth prompting the Fed to pause its cycle of hiking. One of the strongest areas of the US economy has been the jobs market. However, as concerns grow over the outlook of the US economy, traders will be looking for a solid NFP reading to support the greenback. Should we see cracks appearing here than we expect the dollar to take a hit.

Whilst investors will be looking to the NFP for confirmation of a strong jobs market and robust economic growth, the prospects for a solid NFP are not looking promising. Jobless claims are on the up, unemployment increased by less than forecast, factory orders and durable goods are down. Whilst the ISM non-manufacturing index was a ray of light in an otherwise disappointing batch of releases on Thursday increasing to 60.7 from 60.3, crucially the employment component of the report declined. The expectation is for 200k jobs to have been created in November and for wages to tick higher. Investors have priced in a fourth rate hike this year in December, however they are now focused on how much further tightening they can expect next year. Should the jobs report miss expectations we could see a selloff in the dollar with the USD/JPY popping above 112.