Morning Minutes

Energy Selloff Subsides as Investors Await Friday Jobs Data




Yesterday’s sudden slide in energy markets has reversed this morning with US Crude Oil cutting its losses to 0.4% from 1.6% and RBOB Gasoline flipping from down 0.4% to up 0.6% over the last hour. Yesterday’s retreat in energy markets started due to a combination of Russia considering changes to its voluntary cuts, and a 6.4 mmbbl surge in DOE US gasoline inventories. Considering that traders ignored a 2.2 mmbbl drawdown in DOE US Crude Oil inventories and that Natural Gas is up 1.4% and back up above $3.00/mmbtu, it appears that recent weakness may be a combination of a seasonal adjustment in focus from Summer Driving Season to Winter Heating Season, and perhaps also an overdue technical correction particularly with US Crude still trading well above $80.00/bbl and RBOB Gasoline still above $2.00/gallon.

For other markets and economic news it’s an in-between day, giving investors a chance to digest this week’s mostly encouraging Manufacturing and Service PMI reports from around the world, better than expected US Factory Orders and worse than expected ADP Payrolls.

Employment news dominates the calendar for the rest of the week. US weekly initial jobless claims (207K vs street 210K) were in line with expectations. Tomorrow brings the main event, US Nonfarm Payrolls (street 170K vs previous 187K) and Canada Job Growth (street 20K vs previous 39.9K). In addition to the headline numbers, US average hourly earnings (street 4.3% unchanged) and Canada Average Hourly Wages (previous 5.2%) for indications of whether wage inflation is easing, increasing, or holding.

US index futures are flat this morning, while in Europe, the Dax is up 0.25% and the FTSE is up 0.50%. The US 10-year treasury note yield has levelled off just below 4.75%. Gold appears to be stabilizing but Copper is down 0.5%.    

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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