Ok folks, here are five factors to consider on this first Friday in October:
1) It is Nonfarm Friday, and official US employment data has just come out. It was terrible. Only 142,000 jobs were created, when 203,000 were expected. To add insult to injury, last month’s numbers saw a huge downward revision from 173k to 136k. The unemployment rate held at 5.1%, while the labor force participation rate dropped to its lowest level since October 1977 at 62.4%. Disenchantment reigns as a growing number of people throw in the towel from actively looking for a job.
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2) After initially being propelled higher by a sell-off in the dollar immediately after the Nonfarm payrolls report, the crude complex is now charging lower, falling in line with broad-based risk aversion. Despite the evaporation of interest rate-hike expectations in response to the poor employment report, markets are selling off on the fear that the US economy is joining the trend seen in emerging markets: that of economic deterioration. Today is a good day, however, if you own gold or are looking to lock in a mortgage rate (Treasury yields are plummeting). Related:Obama’s Fracking Regulations Take A Serious Hit
3) According to government data, Russian oil output rose to 10.74 million barrels a day in September. This is up 0.4% from August, and the highest level since the fall of the Soviet Union.
4) Hurricane Joaquin strengthened late yesterday to a category 4 hurricane, but is now set to peel away into the Atlantic Ocean, opposed to heading for landfall on the East coast. The impact of a direct hit from Joaquin similar to Sandy would be a bearish influence for oil, as refineries in New Jersey, Pennsylvania, and Delaware would likely have to be shut down – for fear of flooding or damage. Related: Alaska Facing Tough Choices Without Arctic Oil
But the real bearish influence for oil comes from the potential of power cuts. These power cuts could also impact pipeline flows from the Gulf, while waterborne imports into NY Harbor would be delayed. So in a nutshell – bearish for oil, bullish for gasoline, but transitory for all. Fortunately, though, this situation is only hypothetical as Joaquin is set to head further east.
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5) The Brazilian economy continues to worsen, manifested today in industrial production data for August. Although it came in better than expected, it still showed a drop of 9% YoY, with a 1.2% drop on the prior month. Things going from bad to worse in Brazil… Related:Can Economies Of Scale Rescue TSLA?
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Brazilian Industrial Production YoY, % (source: investing.com)
By Matt Smith
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